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Mountainview Energy Ltd. has announced its operating and financial results for the quarter ended September 30, 2014.
Highlights of Q3 2014 are as follows:
- Successfully drilled three wells (1.0 net) in the quarter. This is the eleventh operated well drilled successfully, representing a 100% success rate in drilling operations. Initial production results continue to improve, with capital expenditures decreasing. The most recent well recorded a Company best IP30 rate of 552 boepd (348 boe/d net) and a Company low capital expenditure of $5.8 million ($3.7 million net). The remaining two wells drilled in Q3 are awaiting completion operations.
- Continued the workover program with one well (0.3 net) converted to a Rotoflex pump in the quarter. This makes a total of five wells (2.6 net) converted to longer life, lower operating cost Rotoflex pumps, out of the eight total (5.2 net) producing wells in Divide County, N.D. The remaining three wells will be converted when the current pumps reach the end of their useful life.
- Despite production interruptions due to previously discussed workovers, average production for the nine months ended September 30, 2014 was 839 boe/d, an increase of 44% over the average of 584 boe/d for nine months ended September 30, 2013.
- Generated operating netbacks of $28.83 per boe in Q3 2014, an increase of 10% when compared to $26.13 per boe in Q3 2013.
- Petroleum and natural gas sales for the nine months ended September 30, 2014 were $19 million, a 45% increase over the $13.1 million for the nine months ended September 30, 2013.
Corporate
Mountainview exited the quarter with increased average production and operating netbacks when compared to the prior period quarter. New wells brought online in 2014 have offset intermittent production outages from ongoing workover operations to optimize pumps in Divide County, N.D. In addition, wells with the new Rotoflex pump have experienced no downtime. Mountainview expects to convert all wells to Rotoflex pumps once fluid levels naturally decline to a level best managed by a Rotoflex pump, and when the existing electronic submersible pumps reach the end of their useful life. Going forward, this pump optimization is expected to reduce operating costs and downtime, resulting in higher monthly average production volumes and operating netbacks. The workover operations impacted the lease operating costs for the quarter, resulting in a lower quarter over quarter operating netback per boe. Mountainview also experienced increased financing costs as a result of increased debt in the quarter. The net loss was further compounded by falling commodity prices in the quarter. Mountainview anticipates continuing the development of the infill drilling inventory, benefitting from capital efficiencies associated with pad drilling.
Financial
At quarter-end, Company net debt was $75.9 million and the Company had $49.4 million drawn on its available credit facility of $55.6 million. Funds flow from operations for Q3 2014 decreased from Q3 2013, mainly due to increased operating expenditures.
Exposure to volatility of differentials from WTI and industry concerns with respect to transportation restrictions in the Williston Basin translated into realized prices ranging from $86.63 per barrel of oil in Q3 2013, to $84.33 per barrel of oil in Q3, 2014. In response to this price volatility, the Company has entered into a financial hedging program which commenced in January, 2014. Mountainview had 10% of its production hedged for Q3, 2014, with a floor of $85.00 and a ceiling of $97.70. The Company plans to actively manage its hedging program as its production base grows.
Operations
The Company's Q3 2014 capital plan on its core 12 Gage asset in Divide County, N.D. included the drilling of three wells (1.0 net) and the installation of a Rotoflex pump on one well (0.3 net). The capital program in the quarter cost $7.4 million net to the Company with a 100% success rate. At quarter-end, the 3 wells (1.0 net) had been drilled in the target zone and were awaiting completion. Production equipment was also installed in the third quarter.
The Company has selectively increased its working interest in its assets whenever appropriate as it has become more experienced operationally. This experience has resulted in decreased capital costs on a per well basis from $8.3 million per well to $5.8 million per well.
Outlook
Mountainview has continued to deliver on its strategy of production and reserve growth. Utilizing funds flow from operations, available credit on its existing credit facility, and equity financing as necessary, Mountainview will continue to focus on the development of its core 12 Gage asset in Divide County, N.D.
The Company will continue to pursue a growth strategy using a combination of cash flow and available credit. Mountainview continues to monitor the commodity price environment and is actively pursuing a cost reduction strategy to maximize returns on its production.
