Exploration & Production | Drilling / Well Results | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Production Rates

Gear Energy Increases Production 35% from 2013

Share Print Bookmark    |    Wednesday,November 12,2014

Gear Energy Ltd. has provided the following third quarter operating update to shareholders.

Third Quarter Highlights

• Record production for the third quarter of 6,712 boe per day, a 35 per cent increase per debt adjusted share from 4,642 boe per day in the third quarter of 2013. Despite operational delays due to wet weather early in the quarter, Gear was able to grow production to exit with September averaging over 7,000 boe per day. Fourth quarter production is currently forecast to be 7,100 to 7,300 boe per day.
• Net debt was 1.1 times annualized third quarter cash flow representing a strong balance sheet that provides material flexibility for future opportunities. Effective November 11, 2014, Gear entered into a syndicated demand facility with three banks and increased the borrowing limit from $100 million to $130 million.
• Realized heavy oil prices decreased from $88.01 per bbl in the third quarter of 2013 to $79.72 per bbl in the third quarter of 2014 as a result of lower WTI CAD pricing and wider heavy oil differentials. The market continues to experience downward pricing pressure with WTI CAD barrels trading approximately $15 per barrel lower from the third to the fourth quarter of 2014. Despite this decrease, Gear is predicting a received price of approximately $70 per bbl for the fourth quarter due to continued tight differentials and a favorable foreign exchange ratio. Gear will maintain balance sheet strength in light of expected pricing by optimizing future capital investments and continuing to focus on economic cost cutting initiatives.
• Third quarter operating costs, including transportation, were $21.78 per boe, essentially unchanged from the previous quarter. This is the first quarter of operations for Gear that fully include the higher cost assets acquired on April 30th, 2014. Costs are expected to decline slightly into the fourth quarter with continued optimization and infrastructure investment. Gear expects 2014 costs including transportation to be approximately $21 per boe.
• Drilled 23 gross (20.5 net) successful horizontal oil wells, including eight in Wildmere Cummings and six in Maidstone Cummings. Five gross (2.3 net) wells were drilled into Morgan and Wildmere Sparky which are pools obtained through the acquisition. These five wells averaged 77 bbl per day per well through September, which exceeded expectations. Gear also successfully drilled its first ever dual lateral horizontal wells with two wells into the General Petroleum formation in Wildmere. This has provided a material improvement in expected economic results over a single horizontal well, with approximately double the productivity at only 40 per cent higher drilling cost. The first well has averaged 185 bbl per day for the first 30 days and continues to produce strongly. These results are very encouraging and will be followed up with four more dual lateral horizontal wells into various plays throughout the fourth quarter of 2014.
• Subsequent to quarter end Gear initiated a three well horizontal drilling program to follow up on the successful Lloydminster pool discovery well at Frenchmans Butte. All wells should be on production in the fourth quarter. Further drilling in this exciting new area will be pursued after Gear has completed a 3-D seismic program in early 2015.