Valeura Energy (TSXV:VLE)
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CALGARY, Aug. 25, 2011 /CNW/ --
CALGARY, Aug. 25, 2011 /CNW/ - Valeura Energy Inc. ("Valeura" or the "Corporation") (TSXV: VLE) is pleased to report highlights of its unaudited
financial and operating results for the three and six month periods
ended June 30, 2011, and to provide an update on subsequent
developments. The complete quarterly reporting package for the
Corporation, including the unaudited financial statements and
associated management's discussion and analysis, has been filed on
SEDAR at www.sedar.com and posted on the Corporation's website at www.valeuraenergy.com.
HIGHLIGHTS
Operational
-- Transformed the Corporation with completion of the acquisition
of producing assets in Turkey from Thrace Basin Natural Gas
(Turkiye) Corporation ("TBNG") and Pinnacle Turkey Inc. ("PTI")
on June 8, 2011 at a final adjusted purchase price of $53.7
million:
o Increased proforma petroleum and natural gas sales to 1,874 BOE/d
(93% natural gas in Turkey) in the second quarter of 2011, assuming
the TBNG-PTI volumes were booked for the full quarter, which is a
seven-fold increase from the same period in 2010 at the start-up of
the Corporation.
o Increased land holdings in Turkey to approximately 2.6 million
gross acres (1.0 million net), assuming all farm-in interests are
earned.
o Acquired an established shallow gas production and marketing
business in the Thrace Basin of Turkey, which is currently
realizing wellhead prices of approximately US$7.00/Mcf and includes
wells, gathering and sales lines, compression and a diverse
direct-sales customer base.
o Increased exposure to a potentially significant tight gas resource
play in the Thrace Basin below the existing shallow gas production.
The Corporation now holds interests in approximately 972,000 gross
acres (481,000 net) of onshore lands in the Thrace Basin, assuming
all farm-in lands are earned.
-- Financed the TBNG-PTI acquisition with $81.1 million in
proceeds (net of share issuance costs) from a subscription
receipts financing which closed on February 28. Funds were
released from escrow on June 8 upon closing the acquisition. At
June 30, 2011, the Corporation had a working capital surplus of
$37.1 million.
-- Executed an active shallow gas exploration and development
program on the onshore TBNG-PTI lands (40% Valeura working
interest):
o Completed 12 workovers and recompletions (gross) on existing wells
in the shallow Danismen and Osmancik formations during the second
quarter and eight (gross) in July. The aggregate initial production
rate for these 20 workovers and recompletions (gross) was
approximately 8,000 Mcf/d (gross) (533 BOE/d net).
o Spudded eight wells (gross) in the second quarter and three wells
(gross) in July, of which seven are in various stages of
completion, one is suspended with plans to deepen, one was drilling
at the end of July and two were abandoned. Four of these wells were
drilled into the deeper Mezardere formation. All wells were drilled
on existing 2D seismic control.
o Commenced two 3D seismic surveys in late July in the Tekirdag and
Hayrabolu areas on the TBNG-PTI lands covering an area of 263 km(2)
and 200 km(2), respectively, at an expected cost of approximately
US$4.7 million (net). Fully interpreted results are expected in the
first quarter of 2012. These are the first 3D seismic surveys on
the TBNG-PTI lands and are designed to build the drillable prospect
inventory in the shallow gas play and in the deeper tight gas play.
o Completed single-stage fracs on the Bati Kazanci-3 and
Bati-Kazanci-4 wells in relatively tight sand intervals in the
shallow Osmancik formation. These wells had been previously
suspended after recovering only minor amounts of gas. Bati
Kazanci-3 achieved an initial flow rate of approximately 100 Mcf/d
(gross). Bati Kazanci-4 is currently shut-in due to high formation
water production.
-- Initiated a "proof-of-concept" modern fracture stimulation
("frac") program in late July 2011 in the deeper, undeveloped
tight gas sands in the Mezardere formation on the TBNG-PTI
lands:
o Completed a two-stage frac on the Yazir-2 well in two tight sand
intervals in the Mezardere formation at depths of approximately
1,100 metres and 885 metres. The frac appears to have intersected a
high pressure water zone and only a trace amount of gas was
produced.
o Preparatory work is underway on the second well re-entry and frac
in the Mezardere formation on the Kayi-15 well. The planned frac
interval has been perforated at a depth of approximately 1,230
metres. A pre-frac injection test and a swabbing operation to
confirm producible gas have been completed. It is planned to carry
out a more directed, limited-entry frac into the five sets of
perforations in September.
o The proof-of-concept program is expected to include up to eight
well re-entries with at least a single-stage frac and up to seven
new drills and an associated frac. The 2011 program will target
various tight sand intervals in the Mezardere formation and test a
range of frac volumes and frac geometries to build a learning curve
and optimize the expected go-forward program in 2012.
-- Drilled two gross exploration wells on the Edirne Licence in
the Thrace Basin in the second quarter of 2011 of which one is
awaiting completion and one was abandoned. In addition, three
workovers and recompletions were carried out.
-- Executed a farm-in agreement on May 4, 2011 with Marhat Marmara
Boru Hatlari Ins. Muh Taahh.san.Tic.Ltd.sti. ("Marhat") to earn
a 100% working interest and operatorship of Exploration Licence
4201. The licence covers an area of 122,000 acres (gross) in
the Thrace Basin. The working interest is subject to overriding
royalties of 6.0% to Marhat and 0.6% to an affiliate of
TransAtlantic Petroleum Ltd. ("TransAtlantic"). Under the
farm-in terms, Valeura will be required to drill two
exploration wells into the Mezardere formation.
-- Executed a farm-in agreement on June 13, 2011 with an affiliate
of TransAtlantic to earn a 50% working interest in two
exploration licences 4094 and 4532 in the Thrace Basin. The
licences cover an area of approximately 242,000 acres (gross).
Under the farm-in terms, Valeura will be required to fund
acquisition of 150 km(2) of 3D seismic and two exploration
wells to a depth of at least 1,500 metres.
-- Filed an application with the Toronto Stock Exchange ("TSX") on
July 20, 2011 to graduate to a TSX listing. Subject to the
TSX's approval of this application, the Corporation plans to
consolidate its issued and outstanding common shares on a 10:1
basis at that time.
-- Valeura is one of five companies that submitted conforming bids
for an exploration licence on the area previously encompassed
by Licence 2600, one of the cancelled Rubai Licences near the
borders with northern Iraq and Syria, as published in Turkey's
Official Gazette on June 25. The timing of a decision on the
award of this licence is unknown.
-- An application by Aladdin Middle East Ltd. ("AME") and Guney
Yildizi Petrol Uretim Sondaj, Muteahhitlik ve Ticaret A.S.
("GYP") to extend the term of the Karakilise Exploration
Licence 2674 to May 30, 2014 was published in Turkey's Official
Gazette on June 26. This is a positive development but the
timing of a final GDPA decision is unknown. If the licence
extension is granted, it is expected that Valeura will fund the
deepening of the Altinakar-1 well to the primary exploration
target in the Bedinan Formation.
-- Petroleum and natural gas sales in the second quarter of 2011
averaged 692 BOE/d (net), including 129 BOE/d in Canada, 242
BOE/d from Valeura's 35% interest in the Edirne Licence for the
full quarter and 321 BOE/d from Valeura's 40% interest in the
TBNG-PTI lands for the post-closing period June 9 to 30.
Financial
-- Funds flow from operations in the second quarter of 2011 was
negative ($1,622,240) compared to negative ($885,673) in the
second quarter of 2010, reflecting higher G&A expenses related
to the growth in business activities, partially offset by
higher petroleum and natural gas sales related to the Edirne
and TBNG-PTI asset acquisitions.
-- Capital expenditures in the second quarter of 2011 were
$55,650,606 compared to $449,670 in the second quarter of 2010
reflecting the closing of the TBNG-PTI asset acquisition in
Turkey.
-- As at June 30, 2011, the Corporation had a positive working
capital surplus of $37.1 million, including cash and cash
equivalents of $32.5 million. This compares to a working
capital surplus of $27.4 million as at June 30, 2010.
RESULTS SUMMARY
(Three and six Three Months Three Months Six Months Six Months
month periods Ended Ended Ended Ended
unaudited) June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Financial ($
except share
and per share
amounts)
Petroleum and
natural gas
revenues (net) 2,707,193 892,878 3,269,325 1,754,225
Funds flow from
operations (
(1)) (1,622,240) (885,673) (3,546,565) (1,233,190)
Net loss (4,359,006) (3,194,474) (8,621,015) (4,901,585)
Capital
expenditures 55,650,606 449,670 59,848,568 843,847
Net working
capital surplus 37,101,075 27,436,979
Common shares
outstanding
Basic 464,061,475 198,327,621 - -
Diluted 645,859,765 235,880,121 - -
Share trading
High 0.48 0.90 - -
Low 0.25 0.37 - -
Close 0.25 0.41 - -
Operations
Production
Crude oil &
NGLs (bbl/d) 57 97 55 87
Natural Gas
(Mcf/d) 3,810 994 2,219 980
BOE/d (@ 6:1)
( (2)) 692 263 425 251
Average
reference
prices
Edmonton
light
(Cdn$/bbl)
AECO-5A Daily
Spot
(Cdn$/Mcf)
BOTAS
reference -
Turkey 103.07 75.13 95.11 77.59
(Cdn$/Mcf) ( 3.87 3.89 3.82 4.41
(3)) 8.18 8.79 8.22 8.93
Average
realized prices
Crude oil
(Cdn$/bbl)
Natural gas
liquids
(Cdn$/bbl)
Natural gas -
Turkey
(Cdn$/Mcf) 82.20 66.44 76.35 68.46
Natural gas - 48.97 45.84 51.50 45.52
consolidated 7.05 - 7.05 -
(Cdn$/Mcf) 6.68 3.83 6.36 4.32
Average
operating
netback
(Cdn$ per BOE @
6:1) ((1) (2) ) 24.82 12.01 22.03 14.60
Notes:
(1) The above table includes non-IFRS measures, which may not be
comparable to other companies. Funds flow from operations is
calculated as net loss for the period adjusted for non-cash
items in the statement of cash flows. Operating netback is
calculated as petroleum and natural gas sales less royalties,
production expenses and transportation costs. See MD&A for
further discussion.
(2) BOEs may be misleading, particularly if used in isolation. A
BOE conversion ratio of 6.0 Mcf:1.0 bbl is based on an energy
equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
well head.
(3) Boru Hatlari ile Petrol Tasima Anonim Sirketi ("BOTAS") owns
and operates the national crude oil pipeline grid and the
national natural gas pipeline grid in Turkey. BOTAS regularly
posts prices and its Industrial Interruptible Tariff benchmark
is shown herein as a reference price. See the 2010 Annual
Information Form for further discussion.
OUTLOOK
Operations
The Corporation's primary focus at this time is to "bed-down" the assets
acquired in the TBNG-PTI transaction which is the largest of five
transactions executed in Turkey since September 2010 and the
Corporation's largest source of cash flow.
With respect to the shallow gas business in the Thrace Basin, work is
focused on replenishing the inventory of well recompletions and
workovers on existing wells through an intense effort to look at all
producing and suspended wells. These opportunities have the lowest cost
and promise the quickest payout. To build the inventory of drillable
prospects (both exploration and development) and to improve the
drilling success rate, a large 3D seismic program is underway in two
high potential areas on the TBNG-PTI lands where significant operations
are already in place. The fully interpreted results are not expected
until the first quarter of 2012. In the meantime, the Corporation is
focussed on high-grading the 2011 drilling inventory on the existing 2D
seismic and deferring some earlier planned drilling until the 3D
seismic interpretation is available.
Unlocking the potential in the deeper tight gas play in the Thrace Basin
is a major priority for the Corporation. A deliberate program has been
kicked-off to build a comprehensive knowledge base through acquisition
of new seismic, more sophisticated well logging, more extensive core
analysis work, new geological and geophysical studies and a series of
"proof-of-concept" field experiments with various frac designs and
target tight sand intervals in the Mezardere formation.
Accordingly, the Corporation's work program and budget for 2011 has
three main objectives:
-- Sustaining the shallow gas business in the Thrace Basin;
-- Proving-up the potential of the tight gas play in the Thrace
Basin;
-- Fulfilling exploration-focused work programs on high potential
farm-in acreage in the Thrace Basin (gas targets) and in the
Anatolian Basin (oil targets).
The Corporation has modified its outlook for capital expenditures in
2011 to approximately $20 million compared to earlier guidance of $30
to 35 million based on the results of partner budget meetings in Turkey
in late June. This change relates primarily to deferral of some
discretionary exploration expenditures. The revised budget outlook
excludes any capital invested on the TBNG-PTI and Edirne lands prior to
the closing date of these acquisitions, which amounts were reflected in
purchase price adjustments. The budgeted funds are essentially all
directed to Turkey and include estimates of: $11.7 million for up to 19
drill wells (gross), of which six are shallow gas wells and seven are
deeper Mezardere tests (drill and frac) on the TBNG-PTI lands; $2.6
million for up to 50 workovers and eight fracs (gross) on existing
wells in the Thrace Basin; and, $5.7 million for up to 463 km(2) of 3D seismic and 100 km of 2D seismic in the Thrace Basin.
The Corporation has essentially completed Phase I of the AME-GYP farm-in
and is in discussion with AME-GYP on next steps, including possible
deepening of the Altinakar-1 well to test the Bedinan formation,
contingent on the GDPA granting an extension to the term of Licence
2674. Under terms of the farm-in, Valeura must invest a minimum of
US$8.8 million in Phase I to earn a 25% working interest in two
exploration licences at Karakilise and a production lease at Kahta. The
scope of the ultimate investment and earning under the AME-GYP farm-in
is under review for further discussion with AME-GYP.
Business Development
The Corporation is pursuing other farm-in and acquisition opportunities
in Turkey. These have the potential to further expand the
Corporation's acreage position, particularly in the Thrace Basin.
The Corporation is also pursuing other opportunities in the region,
particularly oil-weighted opportunities, to complement its position in
Turkey.
NEW WEBSITE LAUNCHED
The Corporation has created launched a new website and has updated its
August 2011 corporate presentation, both of which can be accessed on
the Corporation's website at www.valeuraenergy.com.
ABOUT THE CORPORATION
Valeura Energy Inc. is a Canada-based public company currently engaged
in the exploration, development and production of petroleum and natural
gas in Turkey and Western Canada.
CAUTION REGARDING ENGINEERING TERMS
When used herein, the term "BOE" means barrels of oil equivalent on the basis of one BOE being equal to
one barrel of oil or NGLs, or 6,000 cubic feet of natural gas. BOEs may
be misleading, particularly if used in isolation. A BOE conversion
ratio of 6.0 Mcf: 1.0 bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the well head.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release contains certain forward‐looking statements including,
but not limited to: the extent and timing of the frac program on the
TBNG-PTI lands; the approval of the GDPA for the extension of the term
on Licence 2674; the resumption of drilling to a deeper target in the
Altinakar-1 well on Licence 2674; the extent of Valeura investment and
earning under the AME-GYP farm-in; anticipated work programs and
operational plans and the timing associated therewith; and, the
Corporation's plans to graduate to a TSX listing and consolidate its
common shares on a 10:1 basis. Forward‐looking information typically
contains statements with words such as "anticipate", "estimate",
"expect", "potential", "could", "would" or similar words suggesting
future outcomes. The Corporation cautions readers and prospective
investors in the Corporation's securities to not place undue reliance
on forward‐looking information, as by its nature, it is based on
current expectations regarding future events that involve a number of
assumptions, inherent risks and uncertainties, which could cause actual
results to differ materially from those anticipated by the Corporation.
Forward looking information is based on management's current
expectations and assumptions regarding, among other things: continued
political stability of the areas in which the Corporation is
anticipating completing transactions; continued operations of and
approvals forthcoming from the GDPA in a manner consistent with past
conduct; results of future seismic programs; future drilling activity;
future capital and other expenditures (including the amount, nature and
sources of funding thereof); future economic conditions; future
currency and exchange rates; the Corporation's continued ability to
obtain and retain qualified staff and equipment in a timely and cost
efficient manner; and, the receipt of all necessary third party and
regulatory approvals for transactions and the plans of the Corporation.
In addition, budgets are based upon the Corporation's current
acquisition plans, work programs proposed by partners and associated
exploration plans and anticipated costs, both of which are subject to
change based on, among other things, the actual results of
acquisitions, drilling activity, unexpected delays and changes in
market conditions. Although the Corporation believes the expectations
and assumptions reflected in such forward‐looking information are
reasonable, they may prove to be incorrect.
Forward‐looking information involves significant known and unknown risks
and uncertainties. Exploration, appraisal, and development of oil and
natural gas reserves are speculative activities and involve a
significant degree of risk. A number of factors could cause actual
results to differ materially from those anticipated by the Corporation
including, but not limited to, risks associated with the oil and gas
industry (e.g. operational risks in exploration; inherent uncertainties
in interpreting geological data; changes in plans with respect to
exploration or capital expenditures; the uncertainty of estimates and
projections in relation to reserves, production, costs and expenses;
and health, safety, and environmental risks), the risk of commodity
price and foreign exchange rate fluctuations, the uncertainty
associated with negotiating with third parties in countries other than
Canada, the uncertainty regarding competitive bidding rounds (including
the application made in respect of Licence 2600 in Turkey) and timing
of results, the risk of partners having different views on work
programs and potential disputes among partners, the uncertainty
regarding government and other approvals and the risk associated with
international activity. The forward‐looking information included in
this news release is expressly qualified in its entirety by this
cautionary statement. The forward‐looking information included herein
is made as of the date hereof and Valeura assumes no obligation to
update or revise any forward‐looking information to reflect new events
or circumstances, except as required by law.
Additional information relating to Valeura is also available on SEDAR at
www.sedar.com
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.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2011/25/c6094.html
p Jim McFarland, President and CEObr/ Valeura Energy Inc.br/ (403) 930-1150br/ a href="mailto:jmcfarland@valeuraenergy.com"jmcfarland@valeuraenergy.com/a /p p align="justify" Steve Bjornson, CFObr/ Valeura Energy Inc.br/ (403) 930-1151br/ a href="mailto:sbjornson@valeuraenergy.com"sbjornson@valeuraenergy.com/a /p p align="justify" a href="http://www.valeuraenergy.com"www.valeuraenergy.com/a /p