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Aurora Outlines TX Position; Details Sugarkane Downspacing Ops

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   |    Wednesday,January 22,2014

Aurora Oil & Gas Limited has reported an update on corporate activities and progress with the development program of its Eagle Ford assets in the Sugarkane Field in South Texas.

Key quarter-on-quarter results:

• 9% increase in revenue from Q3 2013 (40% increase from Q4 2012).
• 15% increase in production volume (46% increase from Q4 2012).
• 15.6 new net wells were placed on production, including six Aurora operated wells.
• 11.8 net wells were spudded, including three wells on Aurora operated acreage.

Corporate, Operational and Production Highlights

• Revenue: Revenue from oil and gas sales was US$157 million for the quarter ( US$116 million after royalties), comprising 85% oil and condensate, 9% natural-gas liquids (NGLs), and 6% natural gas. 
• Total production:  Gross quarterly production was 2.27 mmboe (82% liquids on a boe basis). Net to Aurora, after royalties, production was 1.68 mmboe. This represented an increase of 15% on the previous quarter and approximately 46% on the corresponding quarter in 2012. Gross production for 2013 was 7.78 mmboe (5.74 mmboe net), a 100% increase year on year.
• Average production:  Average gross production during the quarter was approximately 24,600 boe/d. Net to Aurora, after royalties, average production was approximately 18,200 boe/d, an increase of 15% on the previous quarter.
• Cash and funding: Available liquidity of US$342 million at the end of the quarter, comprising US$42 million in cash and US$300 million available from the existing undrawn revolving credit facility.
• Capital expenditure:  Total development capital expenditure, including accruals, for the quarter totalled US$141 million .  This represented development undertaken at both operated and non-operated acreage during the quarter.
• Well activity:  55 gross wells (15.6 net) were placed on production. 50 gross wells (11.8 net) were spudded during the quarter, which includes three wells on Aurora's operated acreage. In total, there were 387 gross wells (103.2 net wells to Aurora) on production on Aurora's acreage at quarter end.
• Drilling status:  At the end of the quarter, drilling operations were underway on nine gross wells, 27 gross wells were awaiting fracture stimulation and two gross wells were being stimulated or were being prepared for test.
• Operated acreage: Since the acquisition of a 100% working interest in Heard Ranch and Axle Tree in March 2013 , Aurora has spud 12 wells. During the quarter six of these wells were placed on production which, together with the two wells brought on in the third quarter and those on production at the acquisition date, brings Aurora's operated well count to 19 producing wells at year end. A further two wells were brought on production in early January 2014 at Heard Ranch. The first two wells brought on production at Heard Ranch in September, 2013 reported average 30-day IP rates of 821 boe/d.  During Q4, 2013 two wells in the Axle Tree area logged 30-day average rates of 745 boe/d per well.  In late December a three-well pad came on production at Axle Tree as well as a three-well pad at Heard Ranch.
• Exploration: Aurora has secured a position in the Eaglebine play in East Texas which is regionally on trend with the Eagle Ford shale comprising approximately 14,000 net acres to date.

Sugarkane Field - Eagle Ford Shale

Aurora's primary asset is its interest in the Sugarkane Field in South Texas , which is located in the core area of the Eagle Ford shale. Aurora participates in approximately 80,200 highly contiguous gross acres (22,200 net) that make up the field with four adjacent non-operated Areas of Mutual Interest (AMIs) and two operated areas.

Within the Sugarkane Field, Marathon Oil EF LLC, a wholly-owned subsidiary of Marathon Oil Corporation, operates approximately 77,400 gross acres (19,400 net) and Aurora is its largest non-operating working interest partner in this area. In addition, Aurora has a 100% working interest in, and is the operator of, ~2,800 acres within the Axle Tree Ranch and Heard Ranch areas in the Sugarkane Field.

Eaglebine Prospect

Aurora has secured a position in the Eaglebine play regionally on trend with the Eagle Ford shale.  At year end Aurora had approximately 14,000 net acres in the play and continues to look to consolidate its position. This position has been acquired at modest cost reported within past capital expenditures and is not planned to represent a material component of 2014 expenditure. Over the past year the activity level in the Eaglebine play has increased, and consistent with the strategy for de-risking the Sugarkane Field and bringing it to development, Aurora is evaluating various alternatives for its Eaglebine acreage, including potentially acquiring partners to participate in the next stages of project evaluation. Other companies with disclosed interests in the Eaglebine include EOG Resources Inc. and SM Energy Company.

Land and ownership interests

The varying levels of participation in the Sugarkane Field and Eaglebine prospect are outlined in the table below:

Operations

There were between 5 and 11 rigs drilling at any one time on Aurora's non-operated Sugarkane acreage during the reporting quarter and up to two rigs on Aurora's operated acreage. A total of 50 gross (11.8 net) wells were spudded, three of which were on operated acreage.

During the reporting quarter 55 gross (15.6 net) wells were placed on production including six Aurora operated wells. Aurora had an inventory of 29 gross wells at the end of the quarter awaiting commencement and/or completion of stimulation operations.

Two new wells on the Axle Tree Ranch have reached 30 day cumulative production averaging 745 boepd / well.  An additional six wells from two pads drilled during the quarter have come on stream with 24 hour rates as indicated below:

These initial production rates are encouraging but Aurora considers 30-day rates to be a better reflection of early production and these will be released in the normal course.

The following table details activity status within the Sugarkane Field as at December 31, 2013 :

* 8 rigs active at 12/31/2013

A variety of planned well intervention operations have taken place across a number of wells in which Aurora has an interest. Artificial lift installations took place in 29 wells across Aurora's non-operated acreage. These are routine planned operations implemented as individual well reservoir pressures drop. In addition, Aurora has commenced a workover program on its operated properties with the installation of artificial lift on three wells as of year-end.

Multi well pad drilling has increased throughout the 2013 development of Sugarkane Field.  During the fourth quarter 81% of wells were drilled in sequence from the same surface pad location at various locations including Aurora's operated wells. Multi well pad drilling offers cost and efficiency savings as a result of shared infrastructure and avoidance of potentially lengthy rig and fracture stimulation equipment moves. Further efficiencies are being delivered with several pads undergoing batch drilling, whereby the vertical surface hole section of wells at a particular pad location are all drilled first, followed by all of the horizontal sections. This batch approach allows equipment and operations to be configured for a particular repeatable phase of operations resulting in efficiency gains.

Down Spacing and Austin Chalk Update

During December the operator of Aurora's non-operated Sugarkane Field acreage presented successful results of downspacing pilots. These pilots indicated that downspacing will continue to add value across the acreage held by Aurora as a result of observed reservoir performance, together with continued cost reductions and completion optimization. Aurora expects most of its non-operated Sugarkane acreage to be developed on 40 acre spacing based on these results. The operator is now initiating 30 acre spacing pilot programs which, if successful, would add further value to the development of the Sugarkane Field. Aurora is continuing to develop its operated Sugarkane acreage under a 40 acre development plan.

Aurora continues to evaluate several previously announced pilot studies being undertaken by the operator in both the Eagle Ford and Austin Chalk reservoirs. These pilot programs will consider multiple lateral placements within the two reservoirs.

Production

The following table provides details of Aurora's production during the quarter, which comprised 82% liquids on a boe basis.

4^th Quarter 2013 Production

*The oil equivalent barrels per day production rate has been calculated on a 6:1 ratio of gas to oil.

Aurora exited 2013 with estimated average daily gross production in December of 26,450 boe/d (19,500 boe/d net), an increase of 41% from the average production rate in December 2012 .

The graph at the top shows the quarterly production profile for the past 5 quarters. The figures shown at the base of each production bar reflect the incremental net wells added during that period. As indicated in Aurora's 2013 guidance, activities were weighted to the second half of the year and production has increased accordingly.

*Includes 11 existing producing wells acquired as part of the Heard Ranch/Axle Tree Acquisition in March, 2013

Quarterly Revenue and Capital Expenditure

Aurora's revenue from oil and gas sales for the fourth quarter of 2013 totalled US$157 million ( US$116 million after royalties) and US$562 million for the 12 months ended December 31, 2013 .

Total development capital expenditure, including accruals for the quarter totalled US$141 million representing development undertaken at the non-operated acreage within the Sugarkane Field and at the adjacent operated Axle Tree and Heard Ranch acreage. For the 12 months ended December 31, 2013 development capital expenditure, excluding acquisitions, totalled US$494 million .

At December 31, 2013 , Aurora had available liquidity of US$342 million , comprising US$42 million in cash and US$300 million available from the existing undrawn revolving credit facility.