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PetroShale Reports Third Quarter Update

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   |    Monday,November 17,2014

PetroShale Inc. has announced its financial and operating results for the third quarter ended September 30, 2014.

Q3 Highlights:

  • Reported production for the quarter of 248 boe/d (Company interest, gross of royalty) weighted 97% to light crude oil and liquids (195 boe/d net of royalty interest);
  • Realized strong operating netbacks of $53.43 per boe (Company interest, gross of royalty; $67.85 per boe net of royalty interest, each excluding the impact of hedging), reflecting the Company's high-quality, light oil weighted asset base.
  • Showed strong production growth by generating $1.6 million in revenue net of royalties during the period, a 21% increase over the same period in 2013.
  • Successfully expanded the Company's asset base through numerous consolidation transactions in the quarter, investing a total of U.S.$13.3 million in lease, mineral and working interest acquisitions.
  • Engaged in an active drilling program during the quarter, that featured drilling and development capital investment of U.S.$10.7 million.
  • Currently, PetroShale is participating in 26 gross (2.2 net) wells that are in the process of being either drilled or completed and are expected to positively impact production in the first and second quarter of 2015.
  • Increased the capacity of the subordinated loan facility provided by the Company's two largest shareholders from U.S.$30 million to U.S.$50 million, on existing terms.
  • Successfully replaced its existing senior loan facility with a new senior, revolving credit facility from a Canadian bank with a borrowing base of U.S.$10.0 million, which, along with the expansion of the subordinated loan facility, enhances PetroShale's financial flexibility to continue the development and expansion of its activities in North Dakota.
  • Continued focus on building the Company's core North Dakota asset base by completing several purchases of high quality mineral leases, as well as additional working interests in wells that were at various stages of drilling.

Message to Shareholders:

M. Bruce Chernoff, Executive Chairman and CEO:
  • Through the end of the third quarter of 2014, PetroShale has been focused on growing and expanding our assets through a combination of quality consolidation acquisitions coupled with high-impact, targeted drilling in the heart of the North Dakota Bakken.
  • In the first nine months of 2014, PetroShale invested an aggregate of U.S.$26.7 million to close more than 21 acquisitions in North Dakota with $13.3 million of that expended in the third quarter. These transactions added further oil and gas leases in McKenzie, Williams and Mountrail counties, providing existing or potential working interests in multiple drilling spacing units (DSUs), with associated proved undeveloped or probable reserves. PetroShale also purchased working interests in wells at varying stages of drilling, and assumed the related capital obligations to conclude drilling and completion of those wells. Within this expanded asset base, PetroShale continues to identify and participate in attractive drilling opportunities with top tier operators and prudently invest our capital in high-quality drilling locations.
  • During the third quarter, we executed the largest North Dakota Bakken drilling program in PetroShale's history, with U.S.$10.7 million directed to drilling and completions. In undertaking this program, we allocated capital across our core area, where analogous wells have shown very strong initial production rates, quick well payouts and attractive rates of return. We are currently drilling or completing 26 gross (2.2 net) wells, which we anticipate will have positive impacts on our production and revenue in the first and second quarter of 2015.
  • In light of the broader market and commodity price volatility experienced late in the third quarter and into the fourth quarter, the importance of balance sheet strength and financial flexibility for oil and gas companies continues to be an important consideration. PetroShale is well positioned to meet our anticipated capital expenditures over the next 12 months, as a result of our U.S.$50 million subordinated loan facility (with undrawn capacity of U.S.$20.5 million at the end of the third quarter) coupled with our U.S.$10 million senior credit facility (with undrawn capacity of U.S.$7.0 million at September 30, 2014). With continued drilling, production and reserves growth, we anticipate being able to enhance this flexibility over time as the strength and magnitude of the assets grows.
  • Going forward, PetroShale plans to continue to grow organically through our strategic alliance with Slawson Exploration Company Inc. and pursue further drilling on our existing assets. In addition to developing the leases and DSU's that are already within our portfolio, we will continue to review potential acquisitions that fit with our objective of focusing on high-impact, high-quality acreage in the heart of the North Dakota Bakken. We believe the current weakness in commodity prices will provide opportunities for further acquisitions.

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