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Northern Blizzard Lowers 2015 Spending

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   |    Thursday,November 13,2014

Northern Blizzard Resources Inc. has announced its operating and financial results for the three and nine months ended September 30, 2014.

Operations Review

Corporate Production

Production for the third quarter of 2014 was 20,279 boe/d (94% oil), an increase of 3% from second quarter 2014 production of 19,665 boe/d and 3% from third quarter 2013 production of 19,682 boe/d. The increase in production reflects initial positive results from the Plover Lake steam-assisted gravity drainage project, production from the Viking light oil development at Smiley and other new oil wells drilled. Increases were partially offset by natural declines and lower gas production mainly due to natural declines in gas-to-oil ratios. Since the end of the quarter, production has reached our target exit production rate of 24,000 boe/d.

Cactus Lake

Capital spending at Cactus Lake for the first nine months of 2014 was $62.0 million. This included the drilling of 86 (86.0 net) wells and the construction and commissioning of a new polymer mixing facility. We continue to see encouraging signs in the Bakken polymer flood and production response from Phase 1 of the flood is anticipated in mid-2015. Northern Blizzard has completed its Phase 2 expansion of the Bakken polymer flood, with 109 producers and 48 injectors added to the existing operation. The new polymer facility will provide infrastructure capacity for future polymer flood expansion across the remainder of the field. Production at Cactus Lake has reached 7,800 boe/d since the end of the quarter.

Plover Lake SAGD Project

Capital spending at Plover Lake SAGD for the first nine months of 2014 was $48.2 million. This included completion of construction and commissioning of Northern Blizzard's first SAGD facility. First steam injection began in mid-July. First oil production was in August, and oil production averaged 1,012 bbl/d during the month of September. Production at Plover Lake SAGD has exceeded 2,000 bbl/d since the end of the quarter. We are pleased with the ramp up phase of this project and are confident that expected oil production rates of 2,400 bbl/d will be reached in 2014.

Smiley Viking

During the first quarter of 2014, Northern Blizzard drilled its first light oil wells in the Viking play at Smiley. Capital spending during the first nine months of 2014 on the Viking development totalled $31.1 million, with 34 (34.0 net) wells drilled. Our 2014 capital program includes the drilling of up to 46 (46.0 net) wells for the year, six of which will be completed in early 2015. This is an increase of 26 wells in 2014 over our previous plans of 20 wells. Results to date in the Viking program are meeting expectations. Northern Blizzard expects production from the Viking to reach 1,800 boe/d by the end of 2014.

2014 Guidance

Northern Blizzard operates and controls virtually all of its capital spending, much of which is spent on a high number of low cost wells. This provides flexibility in capital spending programs. As a result of the positive results to date from the Viking development program at Smiley, Northern Blizzard's capital program for 2014 was increased to $269 million from previous guidance of $255 million. The increase reflects an acceleration of the timing of the Viking development into 2014 from 2015.

Northern Blizzard expects average production for 2014 to be within the guidance range previously provided of 20,500 boe/d to 21,500 boe/d.

2015 Guidance

In light of the recent decline in oil prices, capital spending for 2015 has been revised to $215 million, $45 million less than previous guidance of $260 million. As a result of the revised capital program, we expect production to be at the lower end of the guidance range previously provided of 24,500 boe/d to 25,500 boe/d. Funds from operations (including hedging) for 2015 is expected to be in the range of $300 million to $321 million.