CALGARY,
March 19, 2015 /CNW/ - Marquee
Energy Ltd. ("Marquee" or the "Company") (TSXV: "MQL") announces
record production and funds flow from operations for the year ended
December 31, 2014. The Company's
financial statements and Management's Discussion and Analysis
("MD&A") for the three and twelve months ended December 31, 2014 are available on SEDAR at
www.sedar.com and on Marquee's website at
www.marquee-energy.com.
Marquee is also pleased to announce that it has
entered into a definitive agreement with a Canadian based company
(the "Partner") for the sale of a static production volume royalty
("PVR") on its Lloydminster
property (the "Agreement Lands") for total consideration of
$20 million. The net proceeds from
this arrangement (the "Transaction") will be used be used to reduce
indebtedness and fund the Company's 2015 Michichi capital
expenditure program.
Royalty Arrangement Highlights
- Cash consideration of $20 million
with an anticipated closing date of March
24, 2015 and an effective date of March 1, 2015.
- Based on proceeds of $20 million,
the transaction implies more than 10 times annualized 2015 cash
flow which is accretive to Marquee's current valuation.
- From its working interest share of production in the Agreement
Lands, Marquee commits the first 137.5 barrels per day of
production to the PVR from the Agreement Lands to the Royalty
Owner.
- The PVR is a fixed royalty that remains constant for the first
8 years from the effective date to February
28, 2023, and subject to a 20% decline per year thereafter,
on a declining balance basis.
- Remaining free cashflow will support a commitment by Marquee to
(i) spend a minimum of $2.75 million
and (ii) drill a minimum of 4 new wells, each per year from
2016-2022, to continue development of the Agreement Lands.
Marquee's technical evaluation of the Agreement Lands forecasts
that it can maintain production levels above 700 barrels per day,
funded only by the assets existing free cashflow over the next 8
years, to support the PVR.
Strategic Rationale
The Transaction is consistent with Marquee's
strategy to effectively capitalize its Michichi core area, which
now represents nearly 80% of its overall corporate production,
reserves and asset value, using non-dilutive disposition proceeds
accessed at a lower cost of capital than where the company
currently trades. Marquee remains focused on executing with
operational excellence, as reflected in achieving significant
improvement in capital, operating and G&A costs along with
realizing steadily increasing productivity, reserve bookings, and
per well economics at Michichi.
Benefits of the Transaction
- The Transaction provides Marquee with a non-dilutive, accretive
source of funding to support financially prudent production and
cashflow additions.
- The funding does not encumber the production, reserves or cash
flow stream at Michichi.
- The drilling opportunities acquired with the recent Michichi
acquisition, which will be financed by this Transaction, possess
compelling economic returns.
- The agreement is accretive to Marquee's current valuation based
on production, reserves and cash flow forfeited. The agreement
materially improves Marquee's financial flexibility, supported by
an expected first half-2015 debt/cashflow multiple below 1.8
times.
Other Notables
- The Company's comprehensive financial and technical evaluation
of its Lloydminster property
forecasts that it can maintain production levels above 700
bbls/day, funded only by the asset's existing free cashflow over
the next eight years, to support the PVR
National Bank Financial Inc. is acting as
Marquee's financial advisors with respect to the Transaction.
Fourth Quarter and Year End 2014
Highlights
- Achieved record average quarterly production of 5,209 boe/d
(46% oil and NGLs) representing a 146% increase compared to
Q4-2013.
- Drilled three horizontal light oil wells at Michichi and three
(net two) horizontal and two vertical heavy oil wells at
Lloydminster.
- Decreased operating costs to $14.99/boe, a 23% improvement from the comparable
period in 2013.
- Reduced general and administrative costs to $3.36/boe, a 47% decrease from the comparable
period in 2013.
- Maintained balance sheet strength with fourth quarter exit net
debt of $63.1 million representing
approximately 1.5 times debt to the fourth quarter annualized cash
flow.
2014 Annual Financial and Operational
Highlights
- Achieved record average annual production of 4,858 boe/d (44%
oil and NGLs) representing a 121% increase compared to 2013.
- Increased 2014 funds flow from operations to $36.7 million, or $0.33 per share compared to $10.8 million or $0.19 per share in 2013, a 74% year-over-year
increase on a per share basis.
- Reduced operating and transportation costs by $3.85 per boe (17.1%), and G&A costs by
$2.45 per boe (39.8%) in 2014
compared to 2013.
- Drilled 23 (net 22) wells during the year (100% success),
including 13 horizontal oil wells and one vertical exploratory test
well at Michichi, plus four (net three) horizontal and five
vertical oil wells at Lloydminster.
- Achieved significant increases in year-end reserves:
- Increased Proved Developed Producing ("PDP")(1)
reserves by 39% to 8.9 mmboe (41% oil and NGLs), Proved ("1P")
reserves by 12% to 12.8 mmboe (51% oil and NGLs) and Proved plus
Probable ("2P") reserves by 16% to 20.0 mmboe (55% oil and
NGLs).
- Increased the NPV10(2) of the Company's PDP reserves
value by 34% to $129.9 million, 1P
reserves value by 26% to $173.6
million and 2P reserves value by 23% to $257.9 million.
- Acquired low decline, operated assets in the Company's core
Michichi area in March 2014 for
$11.1 million, paid for by the
issuance of 13,705,888 common shares and cash of $250,000. The acquired assets included production
of approximately 800 BOE/d, 120 net sections of land with 50 net
sections of oil prone Mannville/Banff rights, a gas processing facility with
20 mmcf/d capacity, and extensive gas gathering
infrastructure.
- Realized net proceeds of $15.8
million on non-core asset dispositions of approximately 425
boe/d (74% gas weighted).
- Raised $20.1 million in a bought
deal equity financing on May 2,
2014.
- Increased 3D seismic coverage to 430 square miles over Marquee
lands.
Subsequent Events
- In February 2015, Marquee closed
the sale of 81 boe/d of non-core oil and gas interests in
Saskatchewan for proceeds of
$3.5 million.
- Also in February, the Company entered into an agreement to
acquire light oil assets in its core Michichi area for
approximately $14.5 million, plus a
property swap valued at $2.0
million. The transaction will add approximately 330
boe/d (79% Oil & NGL's), 3.6 mmboe of Proved and Probable
reserves (based on Sproule reserve evaluation effective
December 31, 2014), and 34 sections
of land containing Banff light oil
rights that are contiguous with Marquee's position in the area. The
transaction is scheduled to close on or before March 30,
2015.
(1)
|
Based on Sproule
Associates Limited ("Sproule") independent reserves evaluation
effective December 31, 2014
|
|
|
(2)
|
Based on "Sproule"
December 31, 2014 forecast prices
|
Summary of Quarterly and Annual Results
|
Three months ended
December 31
|
Year ended December
31
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Financial
(000's except per share and per boe amounts)
|
|
|
|
|
|
|
|
Oil and natural gas
sales (1)
|
$
|
21,353
|
$
|
10,094
|
$
|
92,199
|
$
|
45,295
|
Funds flow from
operations (3)
|
$
|
10,255
|
$
|
145
|
$
|
36,738
|
$
|
10,795
|
|
Per share - basic and
diluted
|
$
|
0.09
|
$
|
0.00
|
$
|
0.33
|
$
|
0.19
|
|
Per boe
|
$
|
21.40
|
$
|
0.75
|
$
|
20.72
|
$
|
13.46
|
Net income
(loss)
|
$
|
2,295
|
$
|
614
|
$
|
(12,810)
|
$
|
(3,013)
|
|
Per share - basic and
diluted
|
$
|
0.02
|
$
|
0.01
|
$
|
(0.12)
|
$
|
(0.05)
|
Capital
expenditures
|
$
|
17,914
|
$
|
14,637
|
$
|
58,275
|
$
|
33,255
|
Asset acquisitions
including non-cash consideration
|
$
|
215
|
$
|
34,791
|
$
|
13,261
|
$
|
34,791
|
Property
Dispositions
|
$
|
-
|
$
|
(601)
|
$
|
(15,727)
|
$
|
(3,749)
|
Net debt (2)
(3)
|
|
|
|
$
|
63,130
|
$
|
73,123
|
Total
Assets
|
|
|
|
$
|
281,976
|
$
|
239,156
|
|
|
|
|
|
|
|
|
Weighted average
basic and diluted shares outstanding
|
120,341
|
|
58,171
|
|
110,492
|
|
55,542
|
|
|
|
|
|
|
|
|
Operational
|
|
|
|
|
|
|
|
Net wells
drilled
|
8.0
|
|
6.0
|
|
22.0
|
|
11.6
|
Daily sales
volumes
|
|
|
|
|
|
|
|
|
Oil and NGLs (bbls
per day)
|
|
2,388
|
|
1,314
|
|
2,157
|
|
1,369
|
|
Gas (mcf per
day)
|
|
16,923
|
|
4,799
|
|
16,203
|
|
4,960
|
|
Total (boe per
day)
|
|
5,209
|
|
2,114
|
|
4,858
|
|
2,196
|
|
% Oil and
NGL's
|
|
46%
|
|
62%
|
|
44%
|
|
62%
|
Average realized
prices
|
|
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
75.67
|
$
|
78.48
|
$
|
89.16
|
$
|
86.77
|
|
|
Heavy Oil
($/bbl)
|
$
|
62.97
|
$
|
59.49
|
$
|
73.75
|
$
|
66.59
|
|
|
NGL's
($/bbl)
|
$
|
47.17
|
$
|
56.89
|
$
|
56.85
|
$
|
60.53
|
|
|
Natural Gas
($/mcf)
|
$
|
3.73
|
$
|
3.82
|
$
|
4.62
|
$
|
3.42
|
Netbacks
|
|
|
|
|
|
|
|
|
|
Revenue
($/boe)
|
$
|
44.56
|
$
|
51.90
|
$
|
52.00
|
$
|
56.51
|
|
|
Royalties
($/boe)
|
$
|
3.64
|
$
|
7.55
|
$
|
5.71
|
$
|
6.05
|
|
|
Operating costs
($/boe)
|
$
|
14.99
|
$
|
19.42
|
$
|
15.20
|
$
|
18.03
|
|
|
Transportation costs
($/boe)
|
$
|
3.25
|
$
|
4.01
|
$
|
3.50
|
$
|
4.52
|
Field operating
netbacks(3)
|
$
|
22.68
|
$
|
20.92
|
$
|
27.59
|
$
|
27.91
|
|
|
(1)
|
Before
royalties.
|
(2)
|
Net debt is
calculated as currents assets less current liabilities, excluding
commodity contracts and flow-through share premiums.
|
(3)
|
These measures are
non-GAAP and do not have a standardized meaning prescribed by IFRS
and, therefore may not be comparable
with similar measures presented by other entities. Please refer to
the non-GAAP financial measures section of this press release
for further information.
|
Outlook
The Company continues to grow its technical and
operational expertise in its primary core area of Michichi
resulting in steady improvements in performance and consistency.
Consolidation and concentration of assets, continued with the
business combination at the end of 2013 and the complementary
acquisition in March 2014. Marquee
expects the most recent transaction at Michichi announced on
February 25, 2015 will be equally
impactful for the Company in the future. Marquee's technically
driven Michichi drilling inventory has now grown to more than 215
locations (29 proven, 29 probable booked) where drilling results
from 2014 shows compelling economics at current pricing.
Marquee's budget for the first half of 2015 is
$5.6 million, and includes a
strategic well at each of Michichi and Lloydminster, as well as some necessary
facility infrastructure costs. The Company continues to work
on its cost structure in all areas, with initiatives targeting
operating, capital and overhead costs. Improvements realized in the
Company's cost structure in 2014 in combination with hedging in the
first half of 2015 will keep the balance sheet strong into the
second half of the year.
The Company will revisit its capital budget for
the remainder of the year in the second quarter to determine
appropriate expenditure levels consistent with prevailing commodity
prices. Planning for the balance of 2015 and 2016 will be based on
strip pricing with prudent capital spending funded by cashflow and
priority given to maintaining or reducing current debt levels.
About Marquee
Marquee Energy Ltd. is a Calgary based, junior oil and gas company
focused on high rate of return oil development and production.
Marquee is committed to growing the company through exploitation of
existing opportunities and continued consolidation within its core
area at Michichi. The Company's shares are traded on the Toronto
Stock Exchange under the trading symbol "MQL.V" and on the OTCQX
marketplace under the symbol "MQLXF". An updated presentation and
additional information about Marquee can be found on its website
www.marquee-energy.com and in its continuous disclosure documents
filed with Canadian securities regulators on the System for
Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com.
FORWARD LOOKING STATEMENTS OR
INFORMATION
Certain statements included or incorporated by
reference in this news release may constitute forward looking
statements under applicable securities legislation. Such
forward looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "propose", or similar words
suggesting future outcomes or statements regarding an
outlook. Forward looking statements or information in this
news release may include, but are not limited to: reserves volumes
and the net present value of future net revenue in relation
thereto; the number and quality of future potential drilling
opportunities; anticipated capital budgets and expenditures;
petroleum and natural gas sales; the expected closing dates for
announced transactions; the timing of matters related to the
Transaction; the anticipated benefits of the Transaction; the
expected use of proceeds of the Transaction; the Company's estimate
first half-2015 debt/cashflow multiple; the Company's forecasted
ability to maintain certain production levels on the Lloydminster property, funded by free cash
flow; the expected benefits to be derived from acquisitions; the
expected use of proceeds from the PVR and business strategies,
objectives and outlook.
In addition, statements relating to "reserves"
are by their nature forward-looking information, as they involve
the implied assessment, based on certain estimates and assumptions
that the reserves described can be profitably produced in the
future. The recovery and reserves estimates provided herein are
estimates only and there is no guarantee that the estimated
reserves will be recovered. The estimated future net revenue from
the production of the disclosed oil and natural gas reserves does
not represent the fair market value of these reserves.
Such forward-looking statements or information
are based on a number of assumptions all or any of which may prove
to be incorrect. In addition to any other assumptions
identified in this document, assumptions have been made regarding,
among other things: that the Transaction and all required approvals
will be completed within the timeline anticipated by Marquee; that
the parties will be able to satisfy, in a timely manner, the other
conditions to the closing of the Transaction; the ability of the
Company to obtain equipment, services and supplies in a timely
manner to carry out its activities; the ability of the Company to
market crude oil, natural gas liquids and natural gas successfully
to current and new customers; the ability to secure adequate
product transportation; the timely receipt of required regulatory
approvals; the ability of the Company to obtain financing on
acceptable terms; interest rates; regulatory framework regarding
taxes, royalties and environmental matters; future crude oil,
natural gas liquids and natural gas prices; the ability to
successfully integrate acquisitions into Marquee's business and
management's expectations relating to the timing and results of
development activities.
Forward-looking information is based on current
expectations, estimates and projections that involve a number of
risks and uncertainties which could cause actual results to differ
materially from those anticipated by the Company and described in
the forward-looking information. These risks and uncertainties
include, but are not limited to the failure to meet the conditions
or regulatory approvals required to close the Transaction and other
material risk factors affecting the Company and its business
contained in Marquee's Annual Information Form, which is available
under Marquee's issuer profile on SEDAR at www.sedar.com.
The forward-looking information contained in this
press release is made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, unless required by
applicable securities laws. The forward looking information
contained in this press release is expressly qualified by this
cautionary statement.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
NON-GAAP FINANCIAL MEASURES
This press release contains the term "field
operating netbacks" which does not have a standardized meaning
prescribed by IFRS and, therefore, may not be comparable with the
calculation of similar measures by other companies. Marquee uses
field operating netbacks to analyze operating performance. Marquee
believes this benchmark is a key measure of profitability and
overall sustainability for the Company and this term is commonly
used in the oil and natural gas industry. Field operating netbacks
are not intended to represent operating profits, net earnings or
other measures of financial performance calculated in accordance
with IFRS.
Field operating netbacks are calculated by
subtracting royalties, production and operating and transportation
expenses from revenues before other income/losses.
The press release also contains the term "funds
flow from operations" which should not be considered an alternative
to, or more meaningful than "cash flow from operating activities"
as determined in accordance with IFRS as an indicator of the
Company's performance. Therefore reference to funds flow from
operations or funds flow from operations per share may not be
comparable with the calculation of similar measures for other
entities. Management uses funds flow from operations to
analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the
Company's ability to generate cash necessary to fund future capital
investments and to repay debt. Funds flow from operations per
share is calculated using the weighted average number of shares for
the period.
In addition, the press release contains the term
"net debt" and "net debt to annualized funds flow". Net debt
and net debt to annualized funds flow is calculated as net debt,
defined as outstanding bank debt plus or minus net working capital
(excluding fair value of commodity contracts and flow-through share
premiums), divided by cash flow from operating activities before
decommissioning expenditures and changes in non-cash working
capital. Management considers net debt and net debt to
annualized funds flow as important additional measures of the time
period it would take to pay off the debt if no further capital
expenditures were incurred and if funds flow from operating
activities remained constant.
ADDITIONAL ADVISORIES
Boes are presented on the basis of one Boe for
six Mcf of natural gas. Disclosure provided herein in respect of
Boe may be misleading, particularly if used in isolation. A Boe
conversion ratio of 6 Mcf: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.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
SOURCE Marquee Energy Ltd.