Cequence Energy Reports Q1 2019 Results

Cequence Energy Ltd.  reported its Q1 2019 results.

Highlights:

• Funds flow from operations(1) was $5.4 million for the three months ended March 31, 2019, $2.1 million higher than the same prior year period and $3.3 million higher than the fourth quarter 2018.

• Oil production for the three months ended March 31, 2019 increased by 274% to 916 bbl/d compared to the same prior year period.

• March 2019 production averaged 6,475 boe/d, 24% crude oil and liquids, as the two new Dunvegan horizontal oil wells produced steadily. Three net Montney wells were reactivated in February.

• Initial production in the first 90 days from the two new Dunvegan horizontal oil wells was 444 boe/d and 369 boe/d, respectively, approximately 60% crude oil and liquids.

Select Highlights:

Three months

Operations

Production for the three months ended March 31, 2019 averaged 5,964 boe/d compared to 6,970 boe/d for the same prior year period. Crude oil production increased by 274% percent to 916 bbl/d for the three months ended March 31, 2019 compared to the first quarter 2018. The increase was due to 3.0 gross (2.0 net) and 2.0 gross (2.0 net) Dunvegan horizontal oil wells that were completed in each of the first quarter 2018 and 2019, respectively, and tied into permanent facilities. Operating costs per boe increased for the three months ended March 31, 2019 compared to the same prior year period due to workover, swabbing and chemical expenses incurred to optimize and reactivate production. Optimization of the new Dunvegan horizontal oil wells and reactivation of 3.0 gross (3.0 net) Montney wells resulted in March 2019 production of 6,475 boe/d. Operating costs are expected to trend between $9.50 per boe and $10.50 be boe for the remainder of 2019.

Operating netback(1) was $13.56 per boe for the three months ended March 31, 2019 compared to $9.36 per boe for the same prior year period. The increase was due to higher realized natural gas prices and increased oil production from the new Dunvegan horizontal oil wells. Higher realized natural gas prices were due to AECO prices supported by cold weather during the first quarter 2019 and the marketing arrangement that the Company entered into for fixed natural gas transportation effective April 1, 2018, where the Company has been selling 10,850 GJ/d of natural gas to the Dawn, Ontario market. The arrangement increased transportation costs by approximately $1.75 per boe for the three months ended March 31, 2019 compared to the same prior year period. It provides diversification and price improvement away from the volatile AECO market with the Company selling approximately 40% of its natural gas to the Dawn, Ontario market

Capital Expenditures

Capital expenditures for the three months ended March 31, 2019 focused at Simonette where the Company completed and tied in the 2.0 gross (2.0 net) Dunvegan horizontal oil wells drilled in the fourth quarter of 2018 and completed in early 2019.

Cequence’s 2019 capital budget is approximately $13.0 million comprised primarily of costs to drill and complete 2.0 gross (2.0 net) Dunvegan horizontal oil wells in the second half of 2019. The capital budget will be funded from funds flow from operations(1).

ABANDONMENT AND RECLAMATION WORK

For the three months ended March 31, 2019 Cequence completed abandonment and reclamation work incurring approximately $2.5 million remediating well sites and removing equipment from the Company’s Silver British Columbia properties. The compressors and power generation equipment removed will be redeployed at Simonette supporting optimization projects to increase production. Management expects decommissioning costs for the remainder of 2019 to be approximately $0.5 million.

Outlook

Cequence continues to monitor commodity price volatility and plans to spend within funds flow from operations(1) in executing its 2019 capital program and meeting its debt maintenance requirements. The Company plans to drill and bring on to production 2.0 gross (2.0 net) Dunvegan horizontal oil wells in the second half of 2019.

Key guidance metrics for 2019 remain as follows: