CALGARY, Jan. 7, 2016 /CNW/ - Yangarra Resources
Ltd. ("Yangarra" or the "Company") (TSX:YGR) provides an
operations update.
Fourth quarter 2015 production is estimated to be 2,600 boe/d,
with two new wells (one 1.0 mile and one 1.5 mile) expected to be
on-stream in January once mandatory static gradients are
performed.
Yangarra's strong gross profit ("GP") margins from operations
(77% GP, Q3 2015) continue despite the low commodity prices. Cash
flow netbacks for Q3 were $20.89/boe.
The combination of low cost structure and product mix of light
sweet oil and liquids rich natural gas, position the Company to
remain profitable even if commodity prices decline further from
current levels.
During the fourth quarter, the Company drilled and completed two
wells and completed three additional wells that were drilled
earlier in the year. All wells drilled in 2015 used cemented liners
and sliding sleeves for completions. The Company has
progressively reduced stage intervals on each successive well
through 2015 and production results have improved with the tighter
spacing.
Initial Production ("IP") rates on recent wells are as
follows:
02/1-26-41-8 W5 (1.5 mile) IP 120 - 341 boe/d 68% oil
02/13-9-41-7W5 (2.0 mile) IP 75 - 153 boe/d 91% oil
1-36-37-8W5 (1.0 mile) IP 60 - 403 boe/d 61% oil
3-26-37-8W5 (1.0 mile) IP 55 - 245 boe/d 54% oil
Sub-Debt Facility
Effective December 31, 2015 the
$10 million subordinated term
facility with Alberta Treasury Branch ("ATB") was not utilized and
therefore was terminated as per the agreement. The
$80 million revolving operating
demand loan remains in place and unchanged, with the next review
scheduled for May 2016. Net debt as at December 31, 2015 is estimated to be $60 million.
Corporate Strategy
Yangarra`s corporate strategy for 2016 in the current commodity
environment is to maintain 2,500 – 2,750 boe/d while spending
within cash-flow. The future growth focus continues to be on
Cardium land accumulation and concentrating ownership in existing
properties while commodity prices are low. The 2016 drilling
program will be weighted toward the second half with first half
expenditures primarily weighted to inventory
accumulation.
Hedging
Yangarra has 35% - 40% of its oil production hedged for 2016 in
a costless collar with a $73.45
CDN/bbl floor and an $85.00
CDN/bbl ceiling.
Forward looking information
This press release contains forward-looking
statements. More particularly, this press
release contains statements concerning planned exploration and
development activities, the anticipated daily production average
during the fourth quarter of 2015, the anticipated profitability of
the Company if commodity prices were to future decline from the
current levels and the planned corporate
strategy during the current commodity environment.
The forward-looking statements in this press release are
based on certain key expectations and assumptions made by Yangarra,
including expectations and assumptions concerning the success of
future drilling and development activities, the performance of
existing wells, the performance of new wells, the successful
application of technology, prevailing weather conditions, commodity
prices, royalty regimes and exchange rates and the availability of
capital, labour and services.
Although Yangarra believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because Yangarra can give no assurance
that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are
not limited to, risks associated with the oil and gas industry in
general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserves estimates; the uncertainty of estimates and projections
relating to production, costs and expenses; and health, safety and
environmental risks), uncertainty as to the availability of labour
and services, commodity price and exchange rate fluctuations,
unexpected adverse weather conditions, general business, economic,
competitive, political and social uncertainties, capital market
conditions and market prices for securities and changes to existing
laws and regulations. Certain of these risks are set out in
more detail in Yangarra's current Annual Information Form, which is
available on Yangarra's SEDAR profile at www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Yangarra at the time the statements are
presented. Yangarra may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Yangarra undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
Any references in this press release to initial and/or final
raw test or production rates and/or "flush" production rates are
useful in confirming the presence of hydrocarbons, however, such
rates are not necessarily determinative of the rates at which such
wells will commence production and decline thereafter.
Additionally, such rates may also include recovered "load oil"
fluids used in well completion stimulation. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production for the Corporation. The
initial production rate may be estimated based on other third party
estimates or limited data available at this time. In all cases in
this press release, initial production or test are not necessarily
indicative of long-term performance of the relevant well or fields
or of ultimate recovery of hydrocarbons.
Gross Profit Margin from Operations
Gross Profit Margin from Operations is calculated as the
funds flow netback divided by the average sales price of its
commodities (including realized gains on financial
instruments).
Non-GAAP Financial Measures
This press release contains references to measures used
in the oil and natural gas industry such as "funds from netback"
and "net debt". These measures do not have standardized
meanings prescribed by GAAP and therefore should not be considered
in isolation. These reported amounts and their underlying
calculations are not necessarily comparable or calculated in an
identical manner to a similarly titled measure of other companies
where similar terminology is used. Where these measures are
used they should be given careful consideration by the
reader. These measures have been described and presented in
this press release in order to provide shareholders and potential
investors with additional information regarding the Company's
liquidity and its ability to generate funds to finance its
operations.
Funds from netback is calculated on a per boe basis.
The Company uses net debt as a measure to assess its financial
position. Net debt includes current assets less current
liabilities excluding the current portion of the fair value of
financial instruments and the deferred premium on financial
instruments.
Barrels of Oil Equivalent
The term barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. Per boe amounts have been
calculated using a conversion ratio of six thousand cubic feet (6
mcf) of natural gas to one barrel (1 Bbl) of crude oil. The
boe conversion ratio of 6 mcf to 1 Bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current
price of crude oil as compared to natural gas is significantly
different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of
value.
All reference to $ (funds) are in Canadian dollars.
SOURCE Yangarra Resources Ltd.