CALGARY, June 16 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: WAV.A and WAV.B) plans to accelerate development of its numerous light oil opportunities due to drilling success and low debt levels. Breaker will now invest an additional $35 million in 2008, focused on new drilling at its three light oil growth properties, its deep Devonian exploration play in British Columbia, and a new horizontal multifrac gas resource play at Provost.
Breaker's 2008 capital budget forecast is now $105 million, increased from $70 million. Of the $35 million increase, $25 million is allocated to projects that add production in 2008, with the balance devoted to longer term projects. This will result in an increased forecast exit rate of 6,900 boe/d, up from the previous estimate of 6,200 boe/d. Breaker now estimates its 2008 full year average production will be 6,000 boe/d. Cash flow is stronger as a result of higher commodity prices with forecast 2008 annual cash flow increasing to $98 million from $66 million. Breaker's bank line is currently $95 million and management forecasts a conservative level of leverage at year-end with net debt of $58 million and a net debt to annualized fourth quarter 2008 cash flow ratio of 0.5. Based on fourth quarter forecast production and strip pricing as of mid-June 2008, annualized fourth quarter cash flow could exceed $150 million.
Irricana
Breaker has realized and maintained significant light oil production increases from drilling in the large original oil-in-place pool at Irricana. Initial rates from new drills have been steadily increasing with time and experience with horizontal drilling and multi-frac completions, particularly in areas proximal to historical poor producers. The most recent drills brought onstream just prior to break-up exceeded rates of 700 boe/d, and are still producing at levels comparable to historical best producers before Breaker initiated the multi-frac completions program. The property has maintained production in excess of 2,800 boe/d for the past three months, an indication of the strength and stability of the ten new wells.
As a result of the significant success of the drilling program, Breaker is increasing the Irricana 2008 budget by $11.4 million to a total of $45 million. Of this extra capital, $7.5 million will allow Breaker to drill an additional two horizontal light oil wells and one additional exploratory Pekisko gas well. The remaining $2.0 million will be used to expand the production infrastructure. The main oil gathering line to the central battery will be looped to alleviate rising pipeline pressures caused by increased production volumes, thus lowering the back pressure on the existing producers to increase total field production. A waterflood injection pilot will also be initiated to test the viability of waterflooding, potentially increasing the oil recovery substantially.
In total, Breaker plans to drill 6 more light oil horizontals, 2 exploratory Pekisko wells, and conduct one Mannville gas recompletion during the balance of 2008. This program will capitalize on the success of the multi-frac horizontal oil wells, and set up potential gas development programs to take advantage of stronger gas prices. In addition to the expanded drilling program, the investment in company owned and operated infrastructure will ensure that the full production potential of the new drills and existing producers can be realized.
Girouxville
At Girouxville, Breaker is doubling the 2008 budget to a total of $13.6 million, allowing the Company to capitalize on its large inventory of deep light oil exploratory prospects that qualify for the $1 million maximum royalty holiday. Four gross (2 net) additional wells with multi-zone targets supported by joint proprietary 3D seismic will be drilled in the third quarter. Breaker has recently demonstrated a 100 percent success rate on similar targets, and should enjoy initial netbacks near $130/bbl based on current oil prices. Additional operated wells at varying working interests and increased seismic acquisition are also planned.
East Prairie
At East Prairie, performance of the wells drilled during the winter program has remained strong. Production from the property during the past three months has remained above 1,200 boe/d net to the Company, of which 325 boe/d is light sweet oil. Subsequent to the ERCB approval for an Enhanced Recovery Scheme granted on May 2nd, Breaker received a Holding disposition from the ERCB on May 23rd which allows for 2 wells per quarter section to be drilled on the lands encompassing the waterflood area of the Viking light oil pool. Progress on this waterflood project has accelerated with full operation now expected by the end of September 2008. Independent reserve evaluators estimate that oil recoveries will double with the implementation of a waterflood.
As a result of the downspacing approval and strong performance of the Viking oil producers, Breaker has expanded its capital program by $1.9 million for 2 gross (1.5 net) additional wells during the third quarter of 2008. In total Breaker plans to drill 3 gross (2.25 net) additional wells during the summer. The Company is well positioned for further infill drilling immediately after a 3D seismic program planned for the winter of 2008/2009.
Southeast Alberta
With the increase in natural gas prices, as well as the continued strong oil price, Breaker plans to be very active in the area for the remainder of 2008. The capital budget has been expanded by $8.0 million to a total of $21.4 million, with approximately $20 million of that remaining to be spent. With a sizeable land base and large inventory of low risk drilling locations, Breaker is well positioned in the area to further capitalize on the strong commodity prices.
At Medicine Hat, Breaker has commenced drilling a 4 well program to further delineate a regionally extensive gas charged sand. The Company has a drilling inventory of more than 50 defined locations in the area.
At Provost, Breaker has commenced water injection into its sizeable medium gravity oil pool and is nearing commencement on its innovative enhanced recovery scheme at its large heavy oil pool. The summer drilling program will include seventeen wells, with an equal split between oil and natural gas targets. The Company plans to apply the multifrac technology being used in Irricana to its first horizontal well in the Viking sand. If successful, this technology could offer a very attractive means of recovering the large gas and oil in place in the regionally extensive Viking sand. Breaker will also recomplete 6 gross wells and tie in 8 gross standing gas wells.
Monias
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Breaker has completed processing and interpretation of its newly-shot 20 square mile proprietary 3D seismic program at Monias, British Columbia, where the company is pursuing a deep Devonian reef play with a potential target size of 1 TCF (unrisked). Breaker is now budgeting a 100 percent working interest operation to re-enter the original well and drill directionally to a new target defined by the seismic program. Subject to weather, licensing and rig availability, the company is planning this drilling activity for fall or early winter of this year, with no production scheduled in the current outlook.
Upward Revision to 2008 Guidance
Breaker plans its most active year ever in 2008 with total capital investment of $105 million. Four drilling rigs are currently working on Breaker properties; two at Irricana, one at Girouxville and one at Medicine Hat. Breaker's revised 2008 guidance is as follows:
Average Production Rate 6,000 boe/d
Exit Production Rate 6,900 boe/d
Cash flow $98 million
Cash flow per A share $2.70
Field Net Back $48.39/boe
Capital Program $105 million
Year-End Debt $58 million
Authorized Bank Line $95 million
Unused Bank Line Capacity $37 million
Q4 Annualized Debt to Cash Flow 0.5 times
The above guidance assumes US$105.00/Bbl WTI, CDN$9.50/mcf AECO and
US$/CDN$1.00 for 2008.
The capital program will be allocated by area as follows:
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Area Gross Wells Net Wells Net Capital ($)
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Irricana 15 15.0 45.0
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Girouxville 9 4.1 13.6
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East Prairie 7 5.8 6.5
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SE AB 22 20.5 21.4
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Monias/Widewater 1 1.0 4.5
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Other - - 14.0
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Total 54 46.4 105.0
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Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.
Breaker has 36,414,737 Class A shares and 900,000 Class B shares outstanding.
Breaker Energy trades on the TSX under the symbols WAV.A and WAV.B.
Forward-Looking Statements
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This press release contains forward-looking statements concerning the Company's expectations of future production, cash flow, earnings and expansion of its oil and gas property interests and concerning the Company's exploration and development drilling, seismic operations, regulatory applications, payout estimates, capital expenditures, number of drilling locations, seismic acquisitions and facility upgrades. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., 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 estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), acquisitions, commodity price, price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other risk factors that could affect the Company's operations and/or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.
The forward-looking statements or information contained in this news release are made as of the date hereof and the Company 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.
Oil and Gas Advisory
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This press release contains disclosure expressed as "boe/d". Boe means barrel of oil equivalent and boe/d means boe per day. All oil and natural gas equivalency volumes have been derived using the ratio of 6,000 cubic feet of natural gas to 1 barrel of oil. Boe equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6,000 cubic feet of natural gas to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.
In this press release: (i) mmboe means million boe; (ii) boe/d means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic feet; (v) mmcf means million cubic feet; (vi) mcf/d means thousand cubic feet per day; and (vii) mmcf/d means million cubic feet per day.
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
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