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Mapan Energy Drills 3 Wells in Fir Area, Deep Basin

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Mapan Energy Ltd. has reported its operating and financial results for the three months ended March 31, 2015.

Capital and Outlook

• Mapan's capital program for 2015 remains flexible since the Company has minimal commitments or financial obligations on its current assets. It is anticipated that natural gas prices for the balance of 2015 will remain much lower than 2014 thus the Company plans to conserve capital and apply a prudent approach to capital expenditures. In the first quarter of 2015, the Company entered into a natural gas contract at a price of $2.57 per gigajoule (GJ) with a notional volume of 10,000 GJs per day through to the end of 2015 to mitigate exposure to the near term volatility of natural gas prices.
• Budgeted capital expenditures for the first half of 2015 are estimated at $9-10 million. As at March 31, 2015 total capital expenditures were $8.6 million. Current estimates for the second half of the year are approximately $3-4 million. Of these expenditures, 34% are drilling, 36% completions and equipping, 25% on workovers and recompletions of existing wells and 5% on land. This capital budget is based on production guidance of 5,700 - 5,800 boe/d for the year however, the Company may revise its capital program and guidance if pipeline outages become extended or If natural gas and oil prices increase significantly or decline further. Based on these parameters, estimated funds flow from operations for 2015 is estimated at $16.5 million.
• The Company currently believes it has over 50 development locations on its lands however, it has only booked eight proven undeveloped locations of which three were drilled during Q1 2015. Mapan believes there are additional economic locations and will seek to book additional drilling locations as commodity prices improve and cash flow increases.
• With a strong balance sheet, Management believes the Company has sufficient resources to fund its ongoing programs.

Highlights

• Average daily production for the first quarter ending March 31, 2015 was 5,656 boe/d notwithsanding the ongoing outages and restrictions during the period by Trans Canada Pipelines Ltd. (TCPL) on their Nova Gas Transmission Ltd. (NGTL) System, which started in early-September of 2014 and are currently ongoing. Between six and nine mmcf/d (1,000-1,500 boe/d) of Company production have been shut in at various times since mid-September due to the NGTL outages.
• Operating netbacks for the first quarter of 2015 were $8.13 per boe based on an average realized price of $17.64 per boe compared to $12.47 per boe based on an average realized price of $34.83 per boe for the comparative 2014 period.
• Funds flow from operations (after tax) for the first quarter of 2015 was $0.05/share or $3.7 million. On a boe basis, funds flow from operations (after tax) was $7.19 for the first quarter 2015.
• Operating costs (net of processing revenue) for the first quarter 2015 were $7.83 per boe, while transportation costs for the same period were $1.37 per boe. Operating costs in the first quarter were higher than anticipated by approximately $1.00 per boe due to one-time costs associated with compressor, vessel and pipeline inspections and maintenance, mainly at the Company's Deep Basin North property.
• The Company has a working capital surplus of $14.4 million, including cash and cash equivalents of $14.6 million at March 31, 2015. Mapan has (and continues to have) no amounts drawn on its $55 million credit facility.
• The Company commenced drilling activities in January 2015 which was comprised of 3 wells (gross and net) in the Fir area of the Alberta Deep Basin. Two of these wells were completed and tied into the Company's facilities in March and the third is expected to be completed and tied in after spring break-up.
• In late April of 2015, TCPL notified producers of further outages at Elmworth restricting transportation to 85% of firm service contracts with no interruptible production service. As a result, Mapan's current production has been reduced from 5,300 boe/d to approximately 4,850 boe/d with approximately 1,700 boe/d currently shut-in. The Company anticipates these production disruptions will continue through the second and third quarters of 2015 until TCPL completes its various inspections and repairs on its NGTL System.

Operational Review

• Mapan's lands are located in the Deep Basin areas of Alberta and British Columbia.
• The Company commenced its drilling activities in January 2015 which was comprised of 3 wells (gross and net) in the Fir area of the Alberta Deep Basin. Two of these wells are completed and will be tied into the Company's facilities in early March while the third is expected to be completed and tied in after spring break-up.
• As previously reported, since September 2014, natural gas production from the Company's Deep Basin North properties at Chinook Ridge, Alberta and Hiding Creek, British Columbia were on restricted rates due to repairs and maintenance conducted by TCPL on its NGTL systems downstream (east) of the Elmworth gas plant. Various production restrictions between six and nine MMcf/d (1,000 - 1,500 boe/d) have continued since September 2014 through the end of the first quarter of 2015 and approximately 1,700 boe/d currently remains shut-in. Production from the Deep Basin North properties represents approximately 70% of Mapan's production. The Company expects production, once restrictions are completely lifted, to return to approximately 6,500 boe/d.

Executive Appointment

• Mapan is pleased to announce the appointment of Mike Dobberthien to the position of Vice President Exploration. Mr. Dobberthien has over 24 years of industry experience and will be a key addition to the Mapan team.