Oct 26, 2010
Tremendous resource potential positions Progress for strong future
growth
CALGARY, Oct. 26 /CNW/ – (TSX – PRQ) - Progress Energy Resources Corp. (“Progress” or the “Company”)
announces results for the third quarter of 2010 (the “Quarter”).
Production averaged 42,335 barrels of oil equivalent (“boe”) per day in
the Quarter, up 12 percent per share as compared to the third quarter
in 2009. Capital investment in the Quarter was $108.2 million and was
primarily directed towards the Company’s Montney properties in the
Foothills of northeast British Columbia.
“We are one of the largest land rights holders in a play that many
industry observers consider to be among the top unconventional gas
plays in North America,” said Michael Culbert, President and Chief
Executive Officer of Progress. “Our Montney program provides
shareholders with unique exposure and leverage to large-scale,
long-term natural gas development, normally associated with a much
larger company. The pace of development has accelerated during the
last six months, more than doubling the number of horizontal wells
since the first quarter of 2010.”
Highlights in the Quarter
Foothills Montney Program Update
Progress has built a Montney land position totaling over 1,400 net
sections in the Montney fairway which spans 350 miles from northeast
British Columbia to northwest Alberta. The primary focus of the
Company’s Montney program has been the Foothills of northeast British
Columbia where exploration and development drilling have expanded the
known productive area on Progress’ lands to approximately 500
sections. The Company expects to be able to drill a minimum of four
wells per section in the Upper Montney and an additional four wells per
section in the Lower Montney on the vast majority of its land base. The
Foothills region has become substantially more competitive during the
past year and Progress continues to selectively add land to complement
its existing drilling program. The Company added approximately 14,000
net acres in the Quarter in the Blueberry area.
At Town South (100 percent working interest), Progress completed two new
horizontal wells in the Quarter. The wells tested at stabilized seven
day rates of 8.8 mmcf and 5.3 mmcf per day respectively, in the Upper
Montney. The well with the higher rate was completed using cluster
perforation technology, which has now become standard fracturing
practice for the Company. These two new wells bring the total number
of successful horizontals in the Town South area to seven, with an
average first month rate of 5.3 mmcf per day. Of significance to the
economics of the Town South development is a liquids content of
approximately 20 barrels per million cubic feet. In the Quarter, the
Company also drilled and cased three wells, with completion operations
currently underway. Three additional wells are planned to be drilled
by the end of the year. Before the end of the fourth quarter, the
Company will complete the expansion of the Town South gas handling
facility to 50 mmcf per day.
At Kobes (30 percent working interest), the Company completed two wells,
four miles apart, with stabilized seven day test rates of 8.7 mmcf per
day and 5.6 mmcf per day in the Lower Montney. Cluster perforating
technology was utilized on the higher producing well. A new
Progress-operated 25 mmcf per day gas handling facility is currently
under construction. The second well is non-operated and was tied
directly into the third-party owned T-North sales pipeline through a
temporary facility. One additional well was drilled in the project in
the Quarter and two additional wells are planned before year end.
At Town North and at Caribou (both 100 percent working interest), three
horizontal wells were drilled and are currently undergoing completion
operations. These horizontal wells are a follow-up to successful
vertical exploration tests and position these areas for the commercial
development phase.
Successful vertical delineation of the over pressured Montney silt/shale
gas accumulations in the Foothills included tests at Altares and Town
West. At Altares, the Company encountered over 325 meters of gas
saturated Montney section and is now producing into Progress’ existing
gathering system. At Town West a successful well testing the Montney
at the base of a deep syncline yielded a commercial gas rate. The
significance of this test is that the Company is now confident that the
Montney gas accumulation in the Foothills is independent of underlying
structure, and therefore more widespread, unlike the traditional
targets in most Foothills environments.
Efforts to reduce the cost to drill a horizontal Montney well have been
successful with the most recent wells costing an average of $2.3
million for a well drilled to a measured horizontal depth of 3,300
meters, which attracts a royalty credit of approximately $2.1 million.
Completions operations remain in the range of $3.5 to $3.7 million as
the Company tests various completion techniques to further enhance
productivity and recoveries. Equipping and tie-in costs are
approximately $0.3 million per well excluding the costs of major
facilities. Progress has contracted for sufficient transportation
capacity to move its production volumes to market. Additionally, the
Company is participating in planned expansions of existing third party
facilities to handle future growth volumes.
“Our Montney program continues to deliver consistent results that are
exceeding our initial expectations from an economic perspective,” said
Mr. Culbert. “We currently have two commercial Montney development pods
on track to be capable of 50 mmcf per day each and will be in a
position to identify an additional three development pods prior to year
end.”
Deep Basin of Northwest Alberta Update
Progress drilled nine wells (7.4 net) in its Deep Basin program in the
Quarter at a 100 percent success rate consistent with the Company’s
success rate in the area since 2009. Four wells were completed in the
Quarter and tested an average of two mmcf per day per well, in line
with historical well performance. The remaining five wells are to be
completed prior to year end. Progress expects to drill five wells in
the Gold Creek, Wapiti and Elmworth areas in the fourth quarter.
Two new compressor facilities were constructed in the Gold Creek and
Elmworth areas during the Quarter. The new stations were required to
provide additional capacity for recent success and the high quality
drilling inventory in the immediate area. The economics of drilling in
the Deep Basin are robust because of the high liquids content of the
natural gas stream and the well developed infrastructure in which
Progress has an ownership interest. The market for natural gas liquids
in Alberta remains strong because of industrial demand and as such,
natural gas liquids prices are expected to remain strong.
Northeast British Columbia Tight Gas Program Update
Six wells (4.1 net) were drilled on the Jedney and Blueberry properties
acquired from Suncor Energy in the second Quarter to test infill and
reservoir sweep concepts. The wells tested between one to three mmcf
per day and have verified a robust inventory of future drilling
opportunities to be pursued as natural gas prices strengthen.
Financial Strength
Cash flow for the Quarter was $44.9 million or $0.21 per share,
diluted. Capital investment was $108.2 million and the dividend for
the third quarter was maintained at $0.10 per common share.
Approximately 28.5 percent of the shares receiving dividends have
participated in the Company’s Dividend Reinvestment Program (“DRIP”)
program in October. Details of the DRIP are included in this news
release.
As at September 30, 2010, the Company had approximately $430 million
available under its $650 million revolving credit facility.
Debt-to-total capitalization for Progress is currently 17 percent.
Progress’ average gas price in the Quarter was $4.06 per thousand cubic
feet (“mcf”), including the impact of the Company’s hedging program.
The Company’s high heat content gas stream achieves a premium to AECO
prices. Royalty rates averaged 15 percent in the Quarter reflecting
lower natural gas prices. Operating costs averaged $6.11 per boe in
the Quarter reflecting the Company’s continued focus on lowering all
parts of its cost structure.
Progress has hedges on approximately 10 percent of its natural gas
production for the remainder of 2010 at an average AECO price of C$5.32
per gigajoule (“GJ”) or C$5.85 per mcf based on the Company’s high heat
content gas stream.
Board Appointment
The Board of Directors of Progress is pleased to announce the
appointment of Mr. Scott Lawrence as a director of the Company. Mr.
Lawrence is Vice President, Head of Relationship Investments for the
Canada Pension Plan Investment Board (“CPPIB”) and oversaw the
investment in Progress by CPPIB earlier this year. He brings extensive
financial and capital markets experience to the Board, and as such has
joined the Audit Committee following his appointment.
Outlook
We are on track in our exploration and production program to invest
approximately $350 million in total in 2010 in our two key operating
regions and exit 2010 within our guidance range of 45,000 to 46,500 boe
per day. The primary focus of the program will be the establishment of
additional Montney commercial development pods throughout the Company’s
extensive Foothills acreage and the further derisking of the Company’s
lands.
At present, we have horizontal and vertical penetrations throughout the
Foothills covering an area of approximately 500 sections or over
320,000 acres of land, representing approximately 40 percent of
Progress’ Foothills land position.
Natural gas prices remain under pressure as a result of relatively high
natural gas directed drilling and sufficient natural gas in storage for
the upcoming winter. Recently, producers have begun to focus capital
into higher natural gas liquids-content or oil plays in order to
benefit from relatively higher valued oil and natural gas liquids. We
believe the impact of reduced gas-directed drilling will be more
evident in the second half of 2011. On the demand side, industrial
demand for natural gas in North America has recovered from the lows
experienced in 2008 and 2009. We believe that natural gas in North
America has a very positive future both as a cleaner fuel for
electrical generation and as a fuel for vehicle usage.
Our focus through the lows in the commodity and business cycles has been
on long-term resource capture to position our Company for the next up
cycle. Our balance sheet provides us with the flexibility to take
advantage of opportunities which add long-term value for shareholders.
The alignment of the interests of the Company’s shareholders and its
management is created through direct ownership in the common shares of
Progress. Management, directors and employees in aggregate hold
approximately seven percent of the outstanding common shares of the
Company.
Investor Day
Progress will be holding its inaugural Investor Day from 8:30 a.m. to
12:00 noon on November 9, 2010 at the Westin Hotel in Calgary, Alberta and on November 10, 2010 at
the Royal York Hotel in Toronto. Institutional investors interested in
attending either session are asked to contact Greg Kist at gkist@progressenergy.com or at 403-539-1809 or contact Kim Lewis at klewis@progressenergy.com or at 403-539-1801.
Dividend Reinvestment Program
In August 2009, Progress announced that it has adopted a dividend
reinvestment plan (the “DRIP”). The DRIP allows eligible shareholders
of Progress to direct that their cash dividends be reinvested in
additional common shares which, when issued from treasury, will be
issued at 95 percent of the Average Market Price (as defined in the
DRIP) on the applicable dividend payment date. A registered
shareholder who wishes to enroll in the DRIP may do so by contacting
Computershare Trust Company of Canada, the Plan Agent. Beneficial
shareholders who wish to participate in the DRIP should contact the
broker or other nominee through which their common shares are held to
provide appropriate enrollment instructions and to ensure any deadlines
or other requirements that such broker or nominee may impose or be
subject to are met.
A complete copy of the DRIP is available by following the “Shareholder
Information – DRIP link” on the “Investors” page of Progress’ website
at www.progressenergy.com or from Computershare by calling 1-800-564-6253. Shareholders should
carefully read the complete text of the DRIP before making any
decisions regarding their participation in the DRIP.
Consolidated Financial Statements and MD&A
Third Quarter 2010 Consolidated Financial Statements and Notes to the
Consolidated Financial Statements and Management’s Discussion and
Analysis for Progress Energy Resources Corp. have been filed on SEDAR (www.sedar.com) under Progress Energy Resources Corp. and can also be accessed on the
Corporation’s website at www.progressenergy.com.
Progress is a Calgary based, mid-size energy Corporation primarily
focused on natural gas exploration, development and production in
northwest Alberta and northeast British Columbia. Common shares of
Progress are listed on the Toronto Stock Exchange under the symbol PRQ.
| Three Months Ended
September 30 |
Nine Months Ended
September 30 |
|||
| 2010 | 2009 | 2010 | 2009 | |
| FINANCIAL HIGHLIGHTS | ||||
| Income Statement ($ thousands,
except per share amounts) |
||||
|
Petroleum and natural gas revenue |
105,305 | 64,421 | 334,635 | 244,111 |
|
Cash flow1 |
44,929 | 20,596 | 144,870 | 119,318 |
|
Per share – diluted |
0.21 | 0.12 | 0.73 | 0.75 |
|
Cash dividends declared2 |
22,779 | 16,513 | 65,413 | 51,258 |
|
Per share |
0.10 | 0.10 | 0.30 | 0.30 |
|
|
|
|
|
|
|
Balance Sheet ($ thousands) |
|
|
|
|
|
Working capital deficiency |
58,243 |
9,041 |
58,243 |
9,041 |
|
Bank debt |
218,133 |
440,518 |
218,133 |
440,518 |
|
Convertible debentures |
247,355 |
126,656 |
247,355 |
126,656 |
|
Total debt |
523,731 |
576,215 |
523,731 |
576,215 |
|
|
|
|
|
|
|
Capital expenditures |
108,215 |
32,042 |
265,630 |
142,059 |
|
Plan of Arrangement3 |
|
457 |
|
663,544 |
|
Asset Acquisition4 |
|
|
389,233 |
|
|
Asset Disposition5 |
|
|
(42,854) |
|
|
|
|
|
|
|
|
OPERATIONAL HIGHLIGHTS |
|
|
|
|
|
Average Daily Production |
|
|
|
|
|
Natural gas (mcf/d) |
222,540 |
157,522 |
209,637 |
168,772 |
|
Crude oil (bbls/d) |
1,872 |
1,874 |
1,900 |
2,050 |
|
Natural gas liquids (bbls/d) |
3,375 |
1,995 |
3,496 |
2,180 |
|
Total daily production (boe/d) |
42,335 |
30,122 |
40,335 |
32,358 |
|
Average Realized Prices |
|
|
|
|
|
Natural gas ($/mcf) |
3.78 |
3.10 |
4.29 |
4.11 |
|
Crude oil ($/bbl) |
69.79 |
69.66 |
72.66 |
56.28 |
|
Natural gas liquids ($/bbl) |
51.35 |
41.46 |
53.56 |
39.20 |
|
Wells Drilled, Net |
21.2 |
10.1 |
49.6 |
35.6 |
(1) Represents cash flow from operating activities before changes in
non-cash working capital.
(2) Includes $1.7 million and $1.4 million of accumulated distributions
and dividends paid on performance units that vested during the nine
months ended September 30, 2009 and the nine months ended September 30,
2010, respectively.
(3) Reverse Takeover of ProEx Energy Ltd. on January 15, 2009.
(4) Foothills asset acquisition on March 31, 2010
(5) West Central Alberta disposition on June 30, 2010
Advisory Regarding Forward-Looking Statements
This press release and financial highlights table (collectively the
“press release”) contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws. The use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”,
“believe”, “plans”, “intends” and similar expressions are intended to
identify forward-looking information or statements. In particular,
forward looking statements in this press release include, but are not
limited to, statements with respect to the focus of capital
expenditures, the timing of capital spending and the results therefrom;
payment of dividends; projections of future land holdings; completion
of planned facility expansions and the timing thereof; future drilling
plans and programs, the timing thereof and the results therefrom;
timing of development of resources; expected commodity prices and
industry conditions.
The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable royalty rates and tax laws; future well production
rates; reserve and resource volumes; the performance of existing wells;
the success obtained in drilling new wells; and the sufficiency of
budgeted capital expenditures in carrying out planned activities; and
the availability and cost of labour and services and future operating
costs. Although Progress believes that the expectations and
assumptions on which such forward-looking statements and information
are based are reasonable, undue reliance should not be placed on the
forward looking statements and information because Progress can give no
assurance that they will prove to be correct.
Since forward-looking statements and information 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, the risks associated with the oil and
gas industry in general such as 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 reserve and resource estimates; the uncertainty of
estimates and projections relating to reserves, resources, production,
costs and expenses; health, safety and environmental risks; commodity
price and exchange rate fluctuations; marketing and transportation;
loss of markets; environmental risks; competition; incorrect assessment
of the value of acquisitions; failure to realize the anticipated
benefits of acquisitions; ability to access sufficient capital from
internal and external sources; changes in legislation, including but
not limited to tax laws, royalties and environmental regulations.
Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide securityholders with a more complete perspective on
the Corporation’s future operations and such information may not be
appropriate for other purposes. The Corporation’s actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them
do so, what benefits that the Corporation will derive there from.
Readers are cautioned that the foregoing lists of factors are not
exhaustive. These forward-looking statements are made as of the date
of this press release and the Corporation disclaims any intent or
obligation to update publicly any forward-looking statements, whether
as a result of new information, future events or results or otherwise,
other than as required by applicable securities laws.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that
could affect the operations or financial results of Progress are
included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this
press release are made as of the date hereof and Progress undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
Barrels of Oil Equivalent
“Boe” means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. Boe’s may be misleading, particularly if
used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet
of natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
%SEDAR: 00020978E