NuLoch Resources Inc. (TSX VENTURE: NLR.A) (TSX VENTURE: NLR.B)
(OTCQX: NULCF) advises that it has filed its unaudited interim
consolidated financial statements as at June 30, 2010 and for the
quarter then ended along with the associated Management Discussion
and Analysis at www.sedar.com and on the Company's website at
www.nuloch.ca.
Q2 Accomplishments
- Completed 11 (3.4 net) Williston Basin oil wells in the
quarter with a 100% success rate;
- De-risked 14% of acreage in North Dakota and 20% in
Saskatchewan through successful drilling;
- Average production increased to 925 boe/d from 837 boe/d in Q1
2010 and from 507 boe/d in Q2 2009;
- Invested $13.0 million in its Q2 capital program and $28.0
million for the year-to-date period; and
- Exited Q2 with an undrawn line of credit in the amount of
$14.0 million.
Despite time lost to inclement weather this spring, NuLoch made
steady progress throughout the second quarter as it drilled and
de-risked its extensive cross-border acreage position in North
Dakota and Saskatchewan. Every completed well is producing light
crude oil from the Middle Bakken or Three Forks Sanish formations.
Average production in Q2 has increased by 82% to a Company record
925 boe/d compared to 507 boe/d in Q2 2009. Current production is
1,025 boe/d and seventy percent is light oil and NGL's. There are
seven recently rig-released or completed wells (2.0 net) that have
not yet contributed to this production rate. Based on our
historical results, those wells are expected to move production to
1,250 boe/d over the next 60 days.
HIGHLIGHTS
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Periods ended June 30,
-------------------------------------
Three months Six months
--------------- ---------------
2010 2009 2010 2009
------- ------- ------- -------
OPERATING
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Production - daily average
Oil and NGL (bbls/d) 649 161 573 160
Natural gas (Mcf/d) 1,659 2,074 1,852 2,107
Combined (boe/d)(1) 925 507 881 511
Average sales prices
Oil and NGL ($/bbl) 73.72 60.89 75.21 53.55
Natural gas ($/Mcf) 3.84 3.94 4.47 4.51
Combined ($/boe) 58.58 35.50 58.26 35.35
FINANCIAL
($ thousands except per share amounts)
----------------------------------------------------------------------------
Petroleum and natural gas revenue 4,931 1,638 9,291 3,270
Funds flow from operations(2) 1,739 556 3,509 1,025
Per share - basic 0.02 0.01 0.04 0.03
Per share - diluted 0.02 0.01 0.04 0.03
Net earnings (loss) (722) (520) (1,002) (1,134)
Per share - basic (0.01) (0.01) (0.01) (0.03)
Per share - diluted (0.01) (0.01) (0.01) (0.03)
Working capital deficiency (1,915) (4,368) (1,915) (4,368)
Line of credit available 14,000 5,700 14,000 5,700
Capital expenditures 12,997 454 27,985 979
COMMON SHARES
(thousands)
----------------------------------------------------------------------------
Class A, end of period 95,499 32,180 95,499 32,180
Class B, end of period 653 653 653 653
Options, end of period 9,498 3,143 9,498 3,143
Basic, weighted average combined 100,212 38,028 94,372 37,668
Diluted, weighted average 100,212 38,028 94,372 37,668
----------------------------------------------------------------------------
(1) Six Mcf of natural gas is considered equivalent to 1 barrel of oil.
(see Advisories)
(2) Cash flow from operations before changes in non-cash operating working
capital. (see Advisories)
Capital Investment Activity
The pace of development continues to accelerate. There are
currently four rigs drilling wells on a continuous basis on
NuLoch's North Dakota lands with plans to add a fifth rig in
September. This will result in 0.5 net horizontal Three Forks
Sanish/Middle Bakken wells drilled per month. This high activity
level is driven by the positive results obtained to date. Land,
acquisitions and seismic expenditures totalled $6.8 million in the
first half of 2010 while $4.4 million was directed to drilling and
equipping wells. A second half 2010 capital budget of $18.0 million
has been allocated to support this North Dakota program.
In Saskatchewan, first half 2010 drilling and equipping costs
were $15.2 million while land and seismic totalled $0.4 million.
NuLoch, as operator, has contracted a drilling rig with plans for
up to 6 (4.0 net) horizontal Three Forks Sanish wells in the last
half of 2010 with a capital budget of $16.0 million.
NuLoch's capital expenditures in areas other than the Williston
Basin, and including capitalized G&A, were $1.2 million in the
first half of 2010 with a similar amount expected over the balance
of the year.
North Dakota Results
Since acquiring its position in North Dakota in 2009 and up to
the end of Q2 2010, the Company has participated in 14 (1.2 net)
Three Forks Sanish wells drilled by three operators. Well
completions were water-based, multi-stage fracture stimulations
with sand proppant. Since the end of Q2 2010, NuLoch has
participated in a further 7 wells (0.8 net) in which completion
operations have commenced or are scheduled. Two of these wells (0.3
net) are on 1280 acre spacings drilled in the Middle Bakken and the
other 5 wells (0.5 net) are on 640 acre spacings in the Three Forks
Sanish. A total of 35 wells (3.5 net) are expected to be completed
in North Dakota during 2010.
Glenn Dawson, President and CEO of NuLoch, stated, "We are
pleased with the pace of drilling on our US properties. In North
Dakota, we have a deeper, higher pressure producing interval for
Three Forks Sanish and greater resource potential in the Middle
Bakken formation than is found on our Saskatchewan lands. Even
though only half of our Williston Basin net acreage is in North
Dakota, ultimately it may provide over three-quarters of the
potential reserves and production arising from our cross-border
position."
Recent NuLoch North Dakota Completions - Gross Well Production and Rates
(bopd)(1)(2)
Cumulative
Zone IP30 IP60 Current bbls oil
Well Name (3) DSU WI% IP Date bopd bopd bopd (4)
---------------------- ---- ---- ---- -------- ---- ----- ------- ---------
Goldal 16-10-161-98 TFS 640 10.0% 2009-08 334 282 80 41,823
Moe 9-162-98 TFS 640 10.0% 2009-09 188 152 40 22,009
Vassen 27-163-99 TFS 640 10.0% 2009-11 453 396 167 54,197
Fuhrman 36-162-99 TFS 640 10.0% 2009-12 106 108 63 11,253
Torgeson 3- 30-163-99 TFS 1280 0.6% 2010-01 312 304 210 35,302
Torgeson 14-19-163-99 TFS 1280 1.2% 2010-01 394 459 350 37,649
Sparks 8-162-98-2 TFS 640 10.0% 2010-02 447 348 150 33,482
Jacobsen 15-161-98 TFS 640 10.0% 2010-04 168 148 102 11,990
Ness 29-32-163-98 TFS 1280 10.0% 2010-05 413 399 370 25,358
Enerson 4-29-163-99 TFS 1280 4.5% 2010-05 175 177 180 11,446
Meyers 2-162-99 TFS 640 10.0% 2010-04 306 - 278 10,984
Radenic 14-20-163-99 TFS 1280 0.6% 2010-06 416 - 650 12,541
Hansen 13-162-99 TFS 640 10.0% 2010-06 - - 265 3,335
Hall 3-161-98 TFS 640 10.0% 2010-06 - - 227 4,950
(1) See Advisories - Initial Production (IP) Rates
(2) All rates are barrels of oil per day and do not include solution natural
gas
(3) TFS is the Three Forks Sanish formation
(4) Cumulative to July 31, 2010
Also in North Dakota, NuLoch has participated in a further 7
wells (0.8 net) on which completion operations will occur in the
second half of 2010.
Outlook for NuLoch North Dakota Completions in Q3 2010
Well Name Zone DSU WI% Status
---------------------- ------------------ ---- ----- ------------
Antonson 1-12-163-95 Middle Bakken 1280 10.0% Fractured
Sorenson 14-162-99 Three Forks Sanish 640 10.0% Rig Released
Lindsey 4-161-98H Three Forks Sanish 640 10.0% Rig Released
Gustafson 29-32-161-92 Middle Bakken 1280 18.7% Rig Released
Grundstad 5-162-99H Three Forks Sanish 640 10.0% Rig Released
Hanson 17-20-163-98 Three Forks Sanish 1280 10.0% Drilling
Hauganoe 15-162-99H Three Forks Sanish 640 10.0% Drilling
Move to Higher-Effort Fracture Stimulations in Canada
In Canada, NuLoch has been extending the Sanish play into
shallower producing intervals northward from the border but has
taken a more conservative approach to the fracture completions.
Stimulations in Canada were more closely spaced with up to 30
stages per mile compared to, typically, 15 stages on our North
Dakota wells. Each stage in Canada received only 15%-20% of the
hydraulic fracturing volumes compared to those pumped per stage in
North Dakota. Consequently, in Canada, sand concentrations per
linear foot of wellbore where much smaller. The average initial
productivity (IP) results in Canada have been less than those
obtained south of the border and may be a result of a number of
variables including depth, pressure, thermal maturity and
stimulation techniques. NuLoch will embark on a round of
higher-effort fracture stimulations patterned from its North Dakota
experience as it completes wells in its second half of 2010
drilling program. With the baseline established, the goals are to
achieve higher IP rates and enhanced economic returns. NuLoch has
contracted a drilling rig with plans for up to 6 wells (4.0 net) in
Tableland during the last half of 2010.
Recent Saskatchewan Completions - Gross Well Production and Rates (bopd)
(1)(2)
Cumulative
Zone IP30 IP60 Current bbls oil
Well Name (3) DSU WI% IP Date bopd bopd bopd (4)
------------------ --- ---- ---- -------- ---- ----- ------- ----------
91/05-02-001-10W2 TFS 640 100% 2009-12 205 147 48 16,184
91/12-12-001-10W2 TFS 640 70% 2010-04 186 148 44 12,299
91/16-06-001-09W2 TFS 640 70% 2010-05 72 67 44 4,919
91/01-22-001-10W2 TFS 640 70% 2010-05 204 166 80 10,571
91/08-24-001-10W2 TFS 640 70% 2010-05 44 - 13 1,711
91/11-02-001-09W2 MB 640 70% 2010-06 - - 31 465
(1) See Advisories - Initial Production (IP) Rates
(2) All rates are barrels of oil per day and do not include solution natural
gas
(3) TFS is the Three Forks Sanish formation and MB is the Middle Bakken
formation
(4) Cumulative to July 31, 2010
Also in Saskatchewan, NuLoch has drilled a further 2 wells (1.4
net) in which completion operations have commenced or are scheduled
for the third quarter.
Outlook for Saskatchewan Completions in Q3 2010
Well Zone DSU WI% Status
---------------------- ------------------ ----- ---- ------------
91/08-04-001-09W2 Three Forks Sanish 640 70% Fractured
91/04-10-001-10W2 Three Forks Sanish 640 70% Rig Released
2010 Production Guidance
NuLoch is focusing its capital activity in the Williston Basin
and, therefore, its non-Williston production is expected to decline
from 550 boe/d to 450 boe/d by year end. The Company has
accumulated a year of operational history since commencing its
program in the Williston Basin. Current production is 205 boe/d in
Saskatchewan and 270 boe/d in North Dakota. Drilling and completion
plans are expected to increase those rates to 550 boe/d and 650
boe/d, respectively, and by the end of 2010, NuLoch targets a
corporate exit rate of 1,650 boe/d with 82% derived from light and
medium crude oil. Achieving these targets is highly dependent upon
the pace of drilling and repeatability of results to date.
Advisories
Use of Barrels of Oil Equivalent (boe)
Disclosure provided herein in respect of boe units may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf of natural gas to 1 bbl of crude oil is based on an
energy equivalency conversion method primarily applicable at the
burner tip and may not represent a value equivalency at the
wellhead.
Non-GAAP Measurement - Funds Flow
Funds flow from operations, calculated as cash flow from
operating activities before changes in non-cash working capital, is
used by the Company as a key measure of performance. Funds flow
from operations does not have a standardized meaning prescribed by
Canadian GAAP and therefore may not be comparable with the
calculation of similar measures for other companies. Funds flow
from operations as presented is not intended to represent operating
profits for the period, nor should it be viewed as an alternative
to cash provided by operating activities, net earnings or other
measures of financial performance calculated in accordance with
GAAP. Many of the Company's peers in the oil and natural gas
industry use the same definition and, therefore, disclosure herein
enhances comparability with those peers. Funds flow from operations
per share is calculated using the same share bases which are used
in the determination of earnings per share.
Initial Production (IP) Rates
Initial production rates of oil and natural gas from a well,
calculated as averages for 30 days (IP30) and 60 days (IP60), can
provide indications of future well performance and is an important
diagnostic tool when making business and capital allocation
decisions. However, such IP's are only limited predictors of
ultimate recoveries of hydrocarbons and early stage or longer term
decline rates from a well.
Forward-Looking Statements
Certain statements in this document or incorporated herein by
reference constitute "forward-looking statements". These
forward-looking statements can generally be identified as such
because of the context of the statements, including words
indicating that the Company "believes", "anticipates", "expects",
"plans" or words of a similar nature. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and
business conditions which will, among other things, impact demand
for and market prices of the Company's products; industry capacity;
the ability of the Company to implement its business strategy,
including exploration and development activities; the ability of
the Company to complete its capital programs; successful
negotiations with bankers and other third parties; the success of
exploration and development activities; production levels;
government regulations and the expenditures required to comply with
them (especially safety and environmental laws and regulations);
asset retirement obligations; and other circumstances affecting
revenues and expenses.
Common Shares Outstanding
Class A : 96,126,038
Class B : 652,500
Contacts: NuLoch Resources Inc. R. Glenn Dawson President and
CEO (403) 920-0455 (403) 920-0457 (FAX) nuloch@nuloch.ca NuLoch
Resources Inc. 2200, 444 - 5th Avenue SW
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