Bow Valley Energy Ltd. announces its 2007 fourth quarter and full year summary financial and operational results and the results of its 2007 oil and natural gas reserves evaluation by GLJ Petroleum Consultants Ltd. and Senergy Ltd. (the "Reserve Report"). All volumes referred to herein are to the Company's working interest share and all volume and value comparisons are to the Company's prior reserve report (U.K. continuing operations only) effective December 31, 2006.
On April 30, 2007, the Company entered into an agreement with a third party for the sale of its Canadian oil and natural gas interests which closed on May 31, 2007. As a result, the Canadian operations have been accounted for as discontinued operations and are excluded from the following financial and operational results.
HIGHLIGHTS
• The Company posted its strongest ever quarterly funds flow and earnings in the fourth quarter of 2007.
• Fourth quarter, 2007 funds flow was $22.2 million, an increase of 4,572% over the fourth quarter of 2006. Fourth quarter funds flow per share (basic) was $0.26, an increase of 2,500% over the fourth quarter of 2006. Fourth quarter cash funds was greater than the previous four quarters, combined.
• 2007 funds flow was $34.8 million, an increase of 285% from 2006. Funds flow per share was $0.43, an increase of 231% year-over-year.
• 2007 net income per share was $0.29, an increase of 1,418% compared to 2006. Fourth quarter 2007 net income per share was $0.14, an increase of 280% compared to the fourth quarter of 2006.
• Sales volumes averaged 1,817 boe/d in 2007, an increase of 181% compared to 2006. Fourth quarter sales volumes averaged 3,769 boe/d, an increase of 629% compared to the fourth quarter of 2006. Production, including accruals and accrual adjustments averaged 4,388 boe/d in the fourth quarter of 2007. Actual production for the fourth quarter was estimated to be 4,134 boe/d. As production exceeded sales, oil inventory grew by 57,300 barrels in the quarter, ending at 130,300 barrels.
• U.K. operating netbacks averaged $65.58 per boe for the full year 2007 and $72.29 per boe for the fourth quarter of 2007. Operating costs (including transportation) averaged $6.31 per boe in 2007, a decrease of 23% per boe compared to 2006.
• Working capital deficiency was $131.4 million at year-end, including bank debt of $137.0 million. Net debt to current quarter funds flow (annualized) is equal to 1.5 times. The working capital deficiency does not include the fair value of the Company's $35.8 million investment in non-bank sponsored asset backed commercial paper ("ABCP"). Including the ABCP in the net debt to cash flow calculation reduces the figure to 1.1 times.
• The Company spent $196.6 million on capital costs in 2007. The capital costs were related to spending in respect of the Company's U.K. development assets portfolio ($85.4 million), U.K. acquisitions ($79.2 million), U.K. exploration ($3.1 million), Alaska ($16.3 million), and capitalized interest and other capital expenditures ($12.6 million).
• Proved plus probable reserves increased 100% to 26.7 million boe, due to the acquisition of an interest in the Peik field. Total proved reserves increased 36% to 6.7 million boe due to the Enoch and Blane fields reaching first production.
• The net present value (NPVBT10 forecast pricing) of proved plus probable reserves increased 103% to $711.6 million.
• The Company has fair valued its investment in ABCP as at December 31, 2007 at $35.8 million representing a $5.3 million (13%) impairment. The Company recorded an unrealized foreign exchange gain of $27.7 million for 2007.
• Subsequent to the end of the year, the Company announced the results of the first well of a multi-well, multi-year exploration program in the U.K. The first well found a smaller than expected oil accumulation, and has been suspended pending further evaluation. The second well was dry. The Company expects to drill two to four exploration wells in the U.K. North Sea over the next twelve months.
• In its first drilling season in Alaska, in early 2007, the Company participated in two exploration wells, resulting in one oil discovery at Northshore No. 1 and one dry hole. The Northshore oil discovery was tested in the 2008 winter season, resulting in a final stabilized oil rate of 2,092 bopd (34 degrees API) from the Ivishak formation. The joint venture partners anticipate additional potential in the untested Sag River formation, as well as two similar, seismically defined, anomalies in close proximity. Success in these other opportunities will help to determine the commerciality of the project area.
• In March of 2008, the Tofkat No. 1 exploration well was drilled to a total depth at 7,703 feet true vertical depth (13,174 feet measured depth). The well encountered several zones which indicated hydrocarbon potential. These zones will be evaluated through logging and testing. A decision has been made to side track the well for appraisal after initial logging and testing is completed.
OPERATIONAL UPDATE
United Kingdom
2007 was the year of first production from two of the Company's development assets. The Enoch field reached first production in May, 2007 while the Blane field reached first production in September, 2007. The contribution from these fields drove production and sales significantly higher in 2007 over 2006, dramatically so in the fourth quarter.
Production, including accruals and accrual adjustments averaged 4,388 boe/d in the fourth quarter 2007 and 2,090 boe/d for the full year of 2007. Actual production for the fourth quarter was estimated to be 4,134 boe/d. Due to the delays in the timing of oil liftings, sales volumes averaged 3,769 boe/d in the fourth quarter of 2007 and 1,817 boe/d for the full year. As a result, the Company's oil inventory grew by 57,300 barrels in the quarter, ending the year at 130,300 barrels. These barrels are valued on the balance sheet in short term assets, at cost. If these barrels were fully lifted in the fourth quarter, sales volumes would have been approximately 1,416 boe/d higher. The Company currently expects liftings in the first quarter of 2008 to exceed production which is currently estimated between 3,700-4,000 boe/d. Caution is warranted however, as lifting schedules change frequently.
Operating costs (including transportation) averaged $6.31 per boe in 2007, a decrease of 23% over 2006. Operating costs are expected to trend higher with Chestnut and Ettrick expected to come on stream in 2008. With strong oil prices and low operating costs, the Company's operating netback from U.K. operations increased strongly to $65.58 per boe in 2007 and $72.29 per boe in the fourth quarter. These strong netbacks, combined with the growing production and sales, led to fourth quarter funds flow which exceeded the previous four quarters funds flow combined.
The Company incurred capital expenditures of $167.7 million in the U.K. in 2007 (not including capitalized interest and capitalized lease rental costs). The majority of the capital spending ($85.4 million) was related to the Company's asset developments. $79.2 million was spent on the acquisition of a 66.67% working interest in Block 9/15a which contains a portion of the Peik field. Senergy Ltd. attributed a discounted future net cash flow of $207.1 million (NPVBT10 @ forecast pricing) to the Company's 35% unitized working interest in this field. The remainder of U.K. capital spending was related to exploration ($3.1 million).
Total proved plus probable reserves increased 100% to 26.7 mmboe, due to the acquisition of an interest in the Peik field. The net present value of those reserves increased 103% to $711.6 million (NPVBT10 @ forecast pricing) due largely to the increased volume of reserves and higher commodity prices. Total proved reserves increased 36% to 6.7 million boe, due to the Enoch and Blane fields reaching first production.
Alaska
In the fourth quarter of 2006, the Company committed to participate in a multi-well, multi-year exploration program on the North Slope of Alaska. The Company agreed to fund approximately 28.57% of certain capital expenditures in up to five wells to earn a 20% working interest in lands then held by the operator.
In its first drilling season in Alaska, in early 2007, the Company participated in two exploration wells, resulting in one oil discovery at Northshore No. 1 and one dry hole. The Northshore oil discovery was tested in the 2008 winter season, resulting in a final stabilized oil rate of 2,092 bopd (34 degrees API) from the Ivishak formation. The joint venture partners anticipate additional potential in the untested Sag River formation, as well as two similar, seismically defined, anomalies in close proximity. Success in these other opportunities will help to determine the commerciality of the project area.
In March of 2008, the Tofkat No. 1 exploration well was drilled to a total depth at 7,703 feet true vertical depth (13,174 feet measured depth). The well encountered several zones which indicated hydrocarbon potential. These zones will be evaluated through logging and testing. A decision has been made to side track the well for appraisal after initial logging and testing is completed.
CORPORATE
The Company's working capital deficiency including bank debt was $131.4 million due to the increased spending related to its U.K. development projects as well as the acquisition of the Peik field. This debt is financed via the Company's US$125 million senior, US$25 million mezzanine and (pnds stlg)17.5 million term debt facilities with a syndicate of banks, led by the Bank of Scotland. In addition, the Company has a US $30 million facility with the National Bank, secured by the Company's investment in ABCP and certain other guarantees.
The Company invested a portion of the proceeds from the sale of its Canadian assets in ABCP. Due to the liquidity issues facing the ABCP market, and global credit conditions generally, the Company has fair valued its investment in ABCP at $35.8 million, representing a $5.3 million (13%) impairment.
"In many ways 2007 was a year of transition as the Company shed its western Canadian oil and natural gas assets while the international portfolio emerged from an undeveloped status into a viable producing asset base," said Robert G. Moffat, President and CEO of Bow Valley. "The very impressive financial performance over the past three to six months validates the Company's business strategy and the resultant diversified production base establishes a platform from which the Company can execute a full-cycle exploration program. We are very proud of the progress being made and have every confidence in our future."
Advanced Geophysics
London, 14th October
Remain on top of the latest technical developments by attending this free forum.
Seats are strictly limited, so don't miss out!
Presenters
CGGVeritas, RXT, ION, Ikon Science, Paras Ltd and more to be announced!
|