CALGARY, ALBERTA–(Marketwire – May 10, 2012) – Chinook Energy Inc. (“Chinook” or the “Company”) (TSX:CKE) announced today its first quarter 2012 financial and operating results, revisions to 2012 guidance and management changes. A complete copy of the Company’s financial statements along with management’s discussion and analysis will be filed on SEDAR and will also be available on the Company’s website at www.chinookenergyinc.com.
During the first quarter of 2012 (“Q1”) Chinook continued the strategy of accelerated development of the Bir Ben Tartar production concession (“BBT”) in Tunisia where we receive exceptional netbacks for our Brent-priced crude oil production and in response to continued soft North American natural gas prices, we have focused our Canadian operations solely on oil and liquids-rich drilling opportunities in the West Central and Peace River Arch areas of Alberta along with continued non-strategic property dispositions.
FIRST QUARTER 2012 FINANCIAL AND OPERATING RESULTS
Q1 production averaged 13,596 barrels of oil equivalent per day down approximately ten percent from fourth quarter 2011 production of 15,119 barrels of oil equivalent per day and down approximately seven percent year over year from 14,646 barrels of oil equivalent per day in the first quarter of 2011. Production volumes were weighted 63 percent towards natural gas where our average price received was $2.27 per thousand cubic feet, down over 40 percent year over year from an average price of $3.85 per thousand cubic feet in the first quarter of 2011. On a positive note, 28 percent of production volumes were oil weighted and received an average price of $101.06 per barrel supported by strong Brent oil priced production that averaged $118.49 per barrel in Q1. Production declines in Q1 are attributed to the prior year and ongoing property dispositions along with our voluntary shut-in of approximately 450 barrels of oil equivalent per day of natural gas production in northeastern Alberta. Tunisia production represented 12 percent of our volumes in Q1 up from four percent of our volumes in the first quarter of 2011 and up slightly from 11 percent in the fourth quarter of 2011.
The year over year production increase from Tunisia has begun to show its significance with the 12 percent production volumes contributing 63 percent of our $19.2 million cash flow in Q1. Q1 cash flow was down 20 percent from the fourth quarter of 2011 and nine percent from the first quarter of 2011 due to lower natural gas prices along with lower production due mainly to our disposition program and voluntary production shut-ins. In this soft natural gas price environment we have benefited and will continue to benefit from having this premium Brent-priced production in our asset base. The cash flow contribution from Tunisia is expected to continue to grow throughout 2012 as we proceed with our continuous development drilling operations at the BBT Concession.
Capital expenditures for the quarter totaled $23.4 million of which $9.3 million was spent in Tunisia and $14.1 million in Canada. Capital expenditures were down 46 percent from the first quarter of 2011. Our net debt at March 31, 2012 was $89.2 million, down approximately 34 percent from year end 2011 net debt of $134.9 million and over 49 percent year over year from first quarter 2011 net debt of $176.5 million. Net debt to annualized Q1 cash flow was approximately 1.2 times and is expected to continue to improve throughout 2012 as our debt is reduced through our disposition of non-core assets along with increased cash flow from our ongoing exploration and development activities.
The disposition of non-core assets continued in Q1 as we completed dispositions for gross proceeds of $56.6 million, before closing adjustments, with associated production of approximately 850 barrels of oil equivalent per day or approximately $66,000 per flowing barrel of oil equivalent, a sales metric which exceeds our enterprise value of $31,000 per flowing barrel of oil equivalent as at March 31, 2012. The disposition of non-core assets to support a strong balance sheet and improve operational efficiencies will be a continued theme throughout 2012 and, as of April 30, 2012 we have disposed of assets representing an additional 202 barrels of oil equivalent per day for proceeds of $19.0 million or $94,000 per flowing barrel of oil equivalent.
Notwithstanding lower natural gas prices, we increased our Q1 corporate netback by two percent to $18.45 per barrel of oil equivalent from $18.04 per barrel of oil equivalent in the first quarter of 2011. We continue to seek ways to improve our operating cost structure by disposing of higher cost properties and replacing them with new lower cost production and continuing to review operating efficiencies on a property by property basis. The improvement in our corporate netback was obtained despite the costs associated with appropriately suspending the shut-in natural gas wells and the fixed costs incurred while they are shut-in.
|Financial and Operating Highlights|
|Three months ended|
|Natural gas Liquids (bbl/d)||1,202||1,692|
|Natural gas (mcf/d)||51,445||55,922|
|Average daily production (boe/d)||13,596||14,648|
|Average oil price ($/bbl)||$101.06||$82.38|
|Average natural gas liquids price ($/bbl)||$70.66||$59.13|
|Average natural gas price ($/mcf)||$2.27||$3.85|
|Average commodity pricing ($/boe)||$43.35||$41.86|
|Net production expenses ($/boe)||$(17.65||)||$(13.48||)|
|Cash G&A ($/boe)||$(3.03||)||$(2.22||)|
|Corporate Netbacks ($/boe)||$18.45||$18.04|
|FINANCIAL ($thousands, except per share amounts)|
|Petroleum and natural gas revenue, net of royalties||$48,509||$44,365|
|Per share – basic and diluted||$0.09||$0.10|
|Per share – basic and diluted||$(0.08||)||$-|
|Common Shares (thousands)|
|Weighted average during period|
|– basic and diluted||214,188||214,188|
|Outstanding at period end||214,188||214,188|
Q1 ACTIVITY AND OPERATIONAL UPDATE
Our 2012 development program on the BBT Concession commenced on February 11 with the drilling of the TT9 vertical development well, which was successfully completed as an Ordovician oil well and brought on production at an initial rate of 300 barrels per day (162 net to Chinook). The Foradex 14 rig was subsequently moved to an exploration location approximately 25 kilometers north of the BBT Concession to drill the BJA-2 well. The well was rig released in April and the target formation was plugged and abandoned. Lease construction is currently underway for our first horizontal well on the BBT Concession which will spud at our TT16 location in May and is expected to be completed by the end of June. We intend to land the horizontal section in the Lower Jeffara (Ordovician) formation and drill a 1,000 meter lateral section completed with up to an eight stage completion. Following TT16 we plan to move immediately to a second horizontal location at TT13. Our program will be the first multi-stage fractured horizontal wells in Tunisia and falls directly within our strategy to bring North American drilling and completion technology to our BBT Concession. We are excited about the potential of the application to unlock substantial value through increased rate and recovery of the large oil in place on the BBT Concession.
Our original plans for 2012 on the BBT Concession were to complete on average one well per month with the support of a second rig for the second half of the year. Program approval delays for the TT16 location put us behind schedule by one well by the end of the second quarter. Subject to the success of the initial horizontal program and the subsequent improvement in the processing of further approvals, we anticipate accelerating the drilling program with the addition of a second rig in the third quarter. Capital expenditures budgeted for facility construction late in 2012 will now be incurred in 2013.
In the offshore projects in the Gulf of Hammamet our partners, the Tunisian national oil company Enterprise Tunisienne d’Activiti