CALGARY, ALBERTA--(Marketwire - March 6, 2013) - NuVista Energy Ltd. ("NuVista") (TSX:NVA) is pleased to announce results for the three and twelve months ended December 31, 2012 and provide an update on its future business plans. 2012 was a pivotal and successful year for NuVista as the business model was transformed in this challenging natural gas price environment. In our year end 2011 press release we indicated we would be carefully evaluating our business to preserve value and ensure a sustainable model without jeopardizing our financial flexibility. We also indicated a focus on proving the valuable long term growth opportunities in the Wapiti Montney play, and that we would pursue dispositions of non-strategic assets throughout 2012 where attractive values could be realized and financial flexibility enhanced. We are pleased to report that we have delivered on these commitments. Through asset sales and strong Wapiti drilling results we have transformed NuVista into a company focused on its large and valuable condensate-rich Wapiti Montney play. We have also reduced long-term debt, net of working capital, from $307 million at December 31, 2011 to $30 million at December 31, 2012, enabling us to adequately capitalize this world class play.
NuVista now has the improved asset quality and financial flexibility to provide the foundation for a growth focused business model and the creation of long-term shareholder value. Heading into 2013 the next key steps in our Wapiti Montney-focused strategy are as follows:
The business environment continued to be challenging for all energy producers in 2012. AECO natural gas prices fell to a 14 year low annual average price of $2.28/GJ down 35% from 2011. This decline was primarily due to over supply of natural gas in the face of an unusually warm winter. In addition, heavy oil prices were down 9% and Edmonton light prices were down 4% compared to 2011 due to larger discounts to WTI crude oil. Low heating demand and supply imbalance have caused propane and butane benchmark prices to drop by 43% and 14% respectively in 2012 versus 2011. Only condensate (pentanes+) maintained excellent pricing in Western Canada, averaging $100.86/Bbl in 2012 (107% of WTI) versus $104.19/Bbl in 2011 on the back of continued strong demand outstripping local supply due to increasing oilsands bitumen blending needs. Due to continued oilsands growth in the province, condensate price strength is expected to continue in the long term, underpinning the strength of NuVista's Wapiti Montney play in which strong economics are dominated by condensate revenues.
NuVista is pleased to announce the appointment of two new directors to its Board, effective March 5, 2013: Mr. Ron Eckhardt and Mr. Sheldon Steeves. Both leaders have significant experience in various aspects of the upstream oil and gas business and we welcome their contributions as we move forward. In addition, Mr. Clayton Woitas has informed the Board of Directors that he will not be standing for re-election at the next Annual General Meeting in May 2013 due to other commitments. The Board of Directors and staff of NuVista would like to thank Mr. Woitas for his many years of dedicated leadership and guidance as a Board member.
Significant highlights for the fourth quarter and full year 2012 include:
Wapiti Montney Play Proven and Set to Grow
During 2012 NuVista significantly advanced its Wapiti Montney play, and coupled with industry results in the greater Wapiti and Resthaven Montney area has confirmed the presence of a large condensate-rich resource. We have moved up from one to an average of two rigs drilling the Montney entering 2013. In 2013, approximately 80% of NuVista's capital budget will be allocated to the Wapiti Montney play and strong results are expected to have a continued significant and positive impact on NuVista's overall corporate performance even in the current natural gas price environment. The premium priced condensate production is the key economic driver of this play. During early 2013, NuVista expects to enter into transportation and processing agreements that will permit NuVista to provide greater clarity on its future capital and growth plans.
In the third quarter of 2012, NuVista completed its $70 million five well and facilities pilot program. Based on the positive results from these wells NuVista continued with its Montney drilling program and this play has become the prime focus of NuVista's future growth and value creation initiatives. NuVista owns Montney rights on 192 (176 net) sections concentrated in the greater Wapiti area after having added 16% more lands to our block in the past year. At December 31, 2012, NuVista had five wells on production, each for a period of at least four months, with average production on track with our 4.4 Bcf raw (5.2 Bcfe) forecast typecurve with the valuable condensate component of this production at 46 Bbls/MMcf (raw), exceeding our typecurve of 35 Bbls/MMcf. Total C3+ liquids have averaged 59 Bbls/MMcf versus our typecurve expectation of 50 Bbls/MMcf.
In September of 2012, NuVista conducted an independent study, assigning contingent resource to the Middle Montney formation on approximately 79 sections, or about 45% of its landholdings. The assigned resource totaled 200 MMBoe (Best estimate), including 45 MMBoe of condensate with a resource net present value before tax, discounted at 10% of $1.25 billion based on evaluator price forecasts at that time. Details of this resource evaluation were disclosed in NuVista's press release dated November 7, 2012. Our independently evaluated 2012 year end reserves report highlights that significant momentum is also building with NuVista's Wapiti Montney reserves. Montney proved reserves increased to 15.7 MMBoe from 5.1 MMBoe and proved plus probable reserves increased to 29.2 MMBoe from 12.1 MMBoe on a year over year basis. At December 31, 2012, only 42 Wapiti Montney wells have been included in NuVista's proved plus probable reserves report. As shown in the reserves section of this document, the 2012 Wapiti Montney activity almost offset the impact of dispositions in the fourth quarter despite drilling with only one rig.
Since our last quarterly press release on November 7, 2012, NuVista has completed and recently brought its sixth Middle Montney well onto production. We have two more wells which have been successfully fractured and completed with testing underway. They are expected to be tied-in and on production in late March or early April of 2013 subject to spring break-up conditions. One fracture completion was delayed due to a mechanical downhole equipment failure and we are currently in the middle of remedial action. Completions and tie-ins continue and we expect to be reporting several more 30-day initial production results in our first quarter 2013 press release. We will continue to update actual production versus typecurve as additional production data is achieved. NuVista has noted industry data on at least five wells with up to a year's production data which indicate larger fracture treatments provide sustained results which support a typecurve increase of 50% or more. Due to this and our technical analysis, we are planning larger fracture treatments for early 2013.
NuVista has drilled two vertical wells near the southwest and northeast extremities of our Montney land blocks in order to acquire logs and core samples towards evaluation of the upper and lower Montney zones. This moves the resource evaluation outwards and deeper. One of these wells is currently being completed in the lowest Montney zone as we continue to lay the groundwork of proving the deeper layers of the Montney formation.
Impairment in Value of Oil and Gas Properties
NuVista recognized a fourth quarter impairment to the value of Property, Plant and Equipment and Goodwill in the amount of $70.5 million. These impairments are primarily due to economic revisions associated with lower oil and natural gas price forecasts used in reserves evaluation and secondarily due to technical reserve revisions. For the year ended December 31, 2012, NuVista recognized impairments to the value of Property, Plant and Equipment and Goodwill totaling $218.5 million. The impairments are described in more detail in NuVista's audited financial statements and management's discussion and analysis for the year ended December 31, 2012, available through NuVista's filings on SEDAR at www.SEDAR.com.
In 2013, NuVista is taking a measured approach to its capital and operating programs. NuVista expects to produce in the range of 15,250 Boe/d to 16,250 Boe/d in the first half of 2013, with the growth benefits of the Montney program beginning to kick-in post breakup with fourth quarter 2013 guidance of 17,500 Boe/d to 18,500 Boe/d depending on second half capital spending. We expect to average two rigs in the Montney formation in 2013, but have front-loaded our capital in the first and second quarter of 2012 with prelaid infrastructure and a temporary third rig, in order to best work around spring break-up. As a result, first half 2013 spending is anticipated to be approximately $110 million followed by reduction in the second half of 2013. We have the flexibility to increase or decrease this average annualized rig count of two subject to balance sheet monitoring, dispositions, the commodity environment, ongoing results, and infrastructure announcements. We will also continue our focus on opportunistic asset divestitures, with a full year 2013 target of $25 million to $50 million in divestiture proceeds.
We remain excited about the tremendous condensate-rich potential of our Montney play at Wapiti, and the continued growth and exceptional value that will be created as we build our scale and the efficiencies that come with it.
|Three months ended December 31,||Year ended |
|($ thousands, except per share)|
|Oil and natural gas revenue||48,277||96,578||242,012||369,234|
|Funds from operations(1)||16,278||48,467||75,672||164,019|
|Per basic share||0.15||0.49||0.75||1.68|
|Per diluted share||0.15||0.49||0.75||1.68|
|Net earnings (loss)||(59,042)||(158,462)||(195,200)||(143,800)|
|Per basic share||(0.56)||(1.59)||(1.93)||(1.47)|
|Per diluted share||(0.56)||(1.59)||(1.93)||(1.47)|
|Adjusted net earnings (loss)(1)||(10,920)||(19,965)||(52,462)||(33,366)|
|Per basic share||(0.10)||(0.20)||(0.52)||(0.34)|
|Per diluted share||(0.10)||(0.20)||(0.52)||(0.34)|
|Long-term debt, net of adjusted working capital(1)||30,388||306,791|
|Capital expenditures, before dispositions||29,194||57,784||116,638||161,830|
|Weighted average common shares outstanding (thousands):|
|Natural gas (MMcf/d)||74.9||101.3||95.3||104.3|
|Natural gas liquids (Bbls/d)||2,939||2,912||3,201||2,974|
|Total oil equivalent (Boe/d)||17,692||25,306||22,577||25,556|
|Average product prices(2)|
|Natural gas ($/Mcf)||2.76||3.63||2.31||3.87|
|Natural gas liquids ($/Bbl)||55.97||68.82||56.97||64.31|
|Natural gas and natural gas liquids ($/Mcfe)||1.78||1.69||1.87||1.70|
|Total oil equivalent ($/Boe)||11.29||11.06||11.17||11.12|
|Operating netback ($/Boe)||14.82||24.88||13.36||21.56|
|Funds from operations netback ($/Boe)(1)||10.00||20.81||9.16||17.58|
|Share trading statistics|
|Average daily volume||332,863||334,916||336,316||272,338|
|(1)||Funds from operations, funds from operations per share, funds from operations netback, operating netback, adjusted net earnings and adjusted working capital are not defined by GAAP in Canada and are referred to as non-GAAP measures. Funds from operations are based on cash flow from operating activities as per the statement of cash flows before changes in non-cash working capital and asset retirement expenditures. Funds from operations per share is calculated based on the weighted average number of common shares outstanding consistent with the calculation of net earnings (loss) per share. Funds from operations netback equals the total of revenues including realized commodity derivative gains/losses less royalties, transportation, operating, general and administrative, restricted stock units, interest expenses and cash taxes calculated on a Boe basis. Adjusted net earnings equals net earnings excluding after tax unrealized gains (losses) on commodity derivatives, impairments and gains (losses) on property divestments. Operating netback equals the total of revenues including realized commodity derivative gains (losses) less royalties, transportation and operating expenses calculated on a Boe basis. Adjusted working capital excludes the current portions of the commodity derivative asset or liability. Total Boe is calculated by multiplying the daily production by the number of days in the period. For more details on non-GAAP measures, refer to NuVista's "Management's Discussion and Analysis".|
|(2)||Product prices include realized gains (losses) on commodity derivatives.|
2012 Year End Reserves Highlights
Our 2012 independent engineering evaluation has been completed by GLJ Petroleum Consultants Ltd. ("GLJ") effective December 31, 2012 (the "GLJ Report").
2012 year end proved reserves were 59.2 MMBoe compared to 69.5 MMBoe at year end 2011. Proved plus probable year end reserves were 94.1 MMBoe compared to 109.7 MMBoe at year end 2011. NuVista's proved and proved plus probable reserve additions (net of revisions) of 13.5 MMBoe and 19.1 MMBoe (over 90% Montney) respectively were offset by reductions from the 2012 asset dispositions totaling 15.6 MMBoe of proved reserves and 26.5 MMBoe of proved plus probable reserves. Also included were negative proved plus probable revisions of 4.5 MMBoe, 83% of which were economic revisions due to reduced price forecasts. Overall finding and development costs, including revisions and future development capital, were $19.17/Boe for proved reserves and $15.53/Boe for proved plus probable reserves. This resulted in a corporate proved plus probable operating netback recycle ratio of 0.9. The corporate recycle ratio reflects the lower average operating netback of our current production mix at low gas prices and is not reflective of the economics of our Montney focused reserve additions in 2012.
2012 Wapiti Montney play specific proved plus probable finding and development costs were $13.16/Boe. Fourth quarter operating netbacks were $18.75/Boe which result in a play recycle ratio of 1.4x despite the challenging natural gas price environment and high one-time operating costs from midstream processors where a once-in-5-year turnaround was completed. The Wapiti Montney play recycle ratio is expected to increase significantly in 2013 (absent of commodity price changes) as drilling and completion costs are reduced and operating costs and netbacks are optimized through scale. The Wapiti Montney recycle ratio and expectations for further improvements are one of the many factors that provide us with the confidence to focus on this play and its ability to create long-term growth and shareholder value.
Other highlights of our reserve report include a proved plus probable RLI of 16.1 years, and a proved plus probable reserves replacement ratio (excluding divested property production) of 315% (based on fourth quarter 2012 production excluding divested properties).
Summary of Corporate Reserves Data
The following table outlines NuVista's corporate finding and development costs in more detail:
|3 Year-Average (1)(2)||2012 (1)(2)||2011 (1)(2)|
|Proved plus||Proved plus||Proved plus|
|After reserve revisions and including changes in future development capital ($/Boe)|
|Finding and development costs||$22.66||$19.12||$19.17||$15.53||$30.58||$28.20|
|(1)||The aggregate of the exploration and development costs incurred in the most recent financial year and the change during the year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for the year.|
|(2)||Drilling credits of nil and $1.3 million were recorded in 2012 and in 2011 respectively.|
The following table provides summary reserve information based upon the GLJ Report using the published GLJ January 1, 2013 price forecast set forth below:
|Reserves category(1)||Working |
|Total proved plus probable||401,356||365,718||18,159||13,938||9,020||7,927||94,072||82,819|
|(1)||Numbers may not add due to rounding.|
The following table is a summary reconciliation of the 2012 year end reserves with the reserves reported in the 2011 year end reserves report:
|Natural Gas(1)||Liquids(1)||Oil(1)||Total Oil Equivalent(1)|
|Balance, December 31, 2011||296.8||9,049||10,950||69,464|
|Exploration and development(2)||59.9||5,391||407||15,774|
|Balance, December 31, 2012||254.2||11,320||5,471||59,155|
|Total proved plus probable|
|Balance, December 31, 2011||470.2||14,917||16,373||109,660|
|Exploration and development(2)||87.4||7,896||1,158||23,628|
|Balance, December 31, 2012||401.4||18,159||9,020||94,072|
|(1)||Numbers may not add due to rounding.|
|(2)||Reserve additions for Drilling Extensions, Infill Drilling and Improved Recovery.|
The following table summarizes the future development capital included in the GLJ Report:
($ thousands, undiscounted)
|Proved plus |
|Balance, December 31, 2011||251,525||473,643|
|Exploration and development, improved recoveries and other||168,412||232,766|
|Balance, December 31, 2012||338,974||534,190|
Summary Wapiti Montney Play Reserves Data
The following table provides summary Wapiti Montney play reserve information based upon the GLJ Report using the published GLJ January 1, 2013 price forecast set forth below (with comparatives at January 1, 2012 price forecast):
|Reserves category||Working |
|Total Proved plus Probable||29,172||25,876||12,125||10,781|
The following table summarizes the Wapiti Montney play future development capital included in the GLJ Report:
($ thousands, undiscounted)
|Proved plus |
|Balance, December 31, 2011||54,581||126,739|
|Exploration and development changes in the year||119,882||159,245|
|Balance, December 31, 2012||174,463||285,984|
The estimates of reserves for the Wapiti Montney play may not reflect the same confidence level as estimates of reserves of all NuVista's properties due to the effect of aggregation.
Summary of Corporate Net Present Value Data
The estimated net present values of future net revenue before income taxes associated with NuVista's reserves effective December 31, 2012 and based on published GLJ future price forecast as at January 1, 2013 as set forth below are summarized in the following table.
The estimated future net revenue contained in the following table does not necessarily represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the GLJ 2012 Report will be attained and variations could be material. The recovery and reserve estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.
|Discount factor (%/year)|
|Reserves category (1)(2) ($ millions)||0%||8%||10%||12%|
|Total proved plus probable||1,773||889||780||691|
|(1)||Numbers may not add due to rounding.|
|(2)||Estimate future net reserves do not represent the fair market value of reserves|
The following table is a summary of pricing and inflation rate assumptions based on published GLJ forecast prices and costs as at January 1, 2013:
|Year||AECO Gas Price |
|Edmonton Propane |
|Edmonton Butane |
|WTI Cushing Oklahoma |
|Edmonton Par Price |
|Hardisty Heavy |
|Cromer Medium |
|Inflation Rates |
|Exchange Rate(2) |
|(1)||Inflation rate for costs.|
|(2)||Exchange rate used to generate the benchmark reference prices in this table.|
CONSOLIDATED FINANCIAL STATEMENTS AND MD&A
December 31, 2012 audited consolidated financial statements and notes to the consolidated financial statements and Management's Discussion and Analysis for NuVista Energy Ltd. have been filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. and can also be accessed on NuVista's website at www.nuvistaenergy.com.
ADVISORY REGARDING OIL AND GAS INFORMATION
This news release contains the terms barrels of oil equivalent ("Boe") and thousand cubic feet equivalent ("Mcfe"). Natural gas is converted to a Boe using six thousand cubic feet of gas to one barrel of oil. In certain circumstances natural gas liquid volumes have been converted to a Mcfe on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and Mcfes may be misleading, particularly if used in isolation. The foregoing conversion ratios are 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.
ADVISORY REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management's assessment of: NuVista's future strategy, plans, opportunities and operations; forecast production; production mix; drilling, development, completion and tie-in plans and results; targeted debt level; the timing, allocation and efficiency of NuVista's capital program and the results therefrom; plans regarding transportation and processing arrangements, the timing thereof and the results therefrom; the anticipated potential of NuVista's asset base; disposition plans, future production; the source of funding of capital expenditures; the objectives and focus of NuVista's capital program and the allocation thereof and results therefrom; recycle ratios, drilling and completion costs, operating costs, netbacks; NuVista's risk management strategy; expectations regarding future commodity prices; and industry conditions.
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista's control, including the impact of general economic conditions, industry conditions, current and future commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and funds from operations, the timing, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties; the ability to access sufficient capital from internal sources and bank and equity markets; and including, without limitation, those risks considered under "Risk Factors" in our Annual Information Form. We have included the above summary of assumptions and risks related to forward-looking statements provided in this news release in order to provide investors with a more complete perspective on our current and future operations and such information may not be appropriate for other purposes. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. NuVista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
ADVISORY REGARDING CONTINGENT RESOURCES
In this press release, NuVista has disclosed the results of an evaluation of the contingent resources associated with the Middle Montney formation of NuVista's Wapiti Montney play. The contingent resource evaluation was prepared by GLJ, NuVista's independent qualified reserves evaluator, in accordance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook and is effective September 1, 2012. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies. The contingencies may include factors such as economics, legal, environmental, political and regulatory matters or lack of markets. A best estimate is the estimate of the quantity of resource that will be recovered from the accumulation, which under probabilistic methodology reflects a 50 percent confidence level. A low estimate is the estimate of the quantity of resource that will be recovered from the accumulation, which under probabilistic methodology reflects a 90 percent confidence level. A high estimate is the estimate of the quantity of resource that will be recovered from the accumulation, which under probabilistic methodology reflects a 10 percent confidence level. Contingent resources are further classified in accordance with the level of certainty associated with the estimates. Contingent resources do not constitute and should not be confused with reserves. There is no certainty that it will be commercially viable to produce any portion of the contingent resources. The contingent resources as disclosed herein are considered economic based on forecast prices and costs as at September 1, 2012. The majority of the 200 MMBoe best estimate of the contingent resources associated with the Middle Montney is represented by natural gas; however, 28.5% (56.8 MMBoe) of the best estimate is represented by natural gas liquids including 44.5 MMBoe of which is classified as condensate. Additional information relating to the contingent resources estimate for the Middle Montney formation of NuVista's Wapiti Montney play, including specific contingencies and significant positive and negative factors associated with the estimate, can be found in NuVista's November 7, 2012 press release, which can be accessed on SEDAR (www.sedar.com) under NuVista Energy Ltd. and can also be accessed on NuVista's website at www.nuvistaenergy.com.