CALGARY, ALBERTA--(Marketwire - May 25, 2011) - NuVista Energy Ltd. ("NuVista") (TSX:NVA) is pleased to announce results for the three months ended March 31, 2011 and provide an update on its 2011 business plan.
Corporate Highlights
Three months ended March 31,
2011 2010
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Financial
($ thousands, except per share)
Oil and natural gas revenue 88,237 105,519
Funds from operations(1) 33,299 53,107
Per basic share 0.36 0.60
Per diluted share 0.36 0.60
Net earnings (loss) (9,590) (14,079)
Per basic share (0.10) (0.16)
Per diluted share (0.10) (0.16)
Total assets 1,532,848 1,555,620
Long-term debt, net of adjusted working capital(1) 355,023 398,312
Net capital expenditures 39,776 75,818
Weighted average common shares outstanding
(thousands):
Basic 91,646 88,443
Diluted 91,646 88,443
Share trading statistics
High 10.45 14.56
Low 8.56 11.55
Close 10.00 11.65
Average daily volume 264,141 377,493
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Operating
Production
Natural gas (MMcf/d) 107.4 124.5
Natural gas liquids (Bbls/d) 3,094 3,303
Oil (Bbls/d) 5,091 4,405
Total oil equivalent (Boe/d) 26,078 28,455
Average product prices(2)
Natural gas ($/Mcf) 4.02 5.42
Natural gas liquids ($/Bbl) 58.66 53.94
Oil ($/Bbl) 65.68 68.14
Operating expenses
Natural gas and natural gas liquids ($/Mcfe) 1.76 1.19
Oil ($/Bbl) 15.46 18.41
Total oil equivalent ($/Boe) 11.50 8.87
Operating netback ($/Boe) 18.71 24.18
Funds from operations netback ($/Boe)(1) 14.19 20.72
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NOTES:
(1) Funds from operations, funds from operations per share, funds from
operations netback, operating netback 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. 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 and assets held for sale. 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.
2011 will be a year of re-positioning NuVista for its next phase of growth. Our focus in early 2011 was on completing the search for a new CEO, improving our financial flexibility, and executing a lower risk drilling program of higher netback oil and liquids-rich natural gas wells. For the remainder of 2011, we will focus on the execution of a drilling program balanced between lower risk drilling opportunities that can deliver near-term operating and financial results and selectively advancing repeatable, large scale resource plays such as the Wapiti Montney which has potential to add significant shareholder value. We will continue to place increased emphasis on cost discipline, efficient execution, and profitability as we conduct our 2011 business plan and plan for the future. With the announcement of our new CEO in early April, we expect to be in a position to communicate additional information on our future growth and value creation strategy later in 2011.
On April 11, 2011, NuVista was pleased to announce the appointment of Mr. Jonathan Wright as President and CEO. Mr. Wright brings a wealth of experience in the energy sector with over 22 years of experience and progressively more responsible roles. Most recently Mr. Wright was a Senior Vice President at Talisman Energy Ltd. directing Talisman's conventional operations division for North America. Mr. Wright has the proven leadership skills, strong operational background and discipline needed to lead NuVista and its team through its next phase of growth. Mr. Wright began his new role as President and CEO on May 9, 2011.
An early 2011 priority for NuVista was improving its financial flexibility through debt reduction as this was key to having a sustainable business platform from which we could advance value recognition for our large and diverse opportunity inventory. We made significant progress on this initiative. On February 15, 2011, NuVista announced that it had entered into private placement agreements and a public offering for the issuance of 10.5 million common shares for gross proceeds of $99.8 million. This equity offering was completed with the strong support of our two largest shareholders and closed on March 8, 2011. On February 15, 2011, NuVista also announced the termination of its dividend in order to improve its financial flexibility and fund future growth opportunities. NuVista also changed the emphasis of its drilling program from the higher risk 2010 drilling program of evaluating new resource plays to a lower risk 2011 drilling program that will deliver near-term operating and financial results. Subsequent to the end of the first quarter, NuVista closed the sale of certain Pembina properties, consisting of approximately 250 Boe/d of production and undeveloped lands, for proceeds of approximately $36.5 million. These transactions and changes to our business plan have contributed to significantly enhancing our financial flexibility, thereby providing the foundation and financial strength to proceed with our 2011 capital program and future growth plans.
Significant highlights for the first quarter of 2011 include:
-- Drilled 11 (7.6 net) wells resulting in 8 (6.5 net) oil wells and 3 (1.1
net) natural gas wells, for an overall success rate of 100%;
-- Drilled 3 (2.3 net) Birdbear heavy oil wells at Zoller Lake and Hallam
in Saskatchewan, including a test well into the southern extension of
the Hallam pool which showed very encouraging results and will result in
several follow-up locations;
-- Drilled our first horizontal Spirit River liquids-rich natural gas well
in our Pembina/Ferrier operating area. In late April, this well was
brought on production at a restricted rate of 5 MMcf/d. This well has
offsetting follow-up locations and is expected to result in increased
Spirit River and Notikewin activity in 2011 and 2012;
-- Drilled 2 (2.0 net) wells following up our best West Pembina Cardium oil
wells drilled in 2010 and drilled 2 (2.0 net) wells in our Wapiti
Cardium play to further evaluate drilling and completions technology and
production from this high oil and liquids in-place play;
-- Increased higher netback oil and liquids production to 8,185 Bbls/d from
7,708 Bbls/d in the same period in 2010 and 7,959 Bbls/d in the fourth
quarter of 2010. Our oil and liquids production weighting increased to
31% from 27% in the same period in 2010 and 28% in the fourth quarter of
2010; and
-- Reduced debt, net of adjusted working capital, to $355 million at March
31, 2011 from $444 million at December 31, 2010. Debt, net of adjusted
working capital, is expected to be further reduced in the second quarter
of 2011 with proceeds from the Pembina Cardium property sale and as a
result of lower capital spending associated with spring break-up.
With the priority of improving financial flexibility in first quarter of 2011, our capital program was restricted to $40 million. This muted level of spending, coupled with 600 Boe/d of shut-in production due to unplanned third-party facility outages and colder than normal weather, resulted in production for the first quarter of 26,078 Boe/d an 8% decrease from the same period a year ago. NuVista experienced higher operating expenses in the first quarter of 2011 mainly due to the impact of colder than normal winter weather on operations and higher power and fuel costs. With a large component of our operating costs being fixed in the short-term, lower production volumes resulted in higher per unit operating expenses. Managing our operating costs will be a priority for us over the remainder of the year as we target higher value but typically higher operating cost oil and liquids-rich natural gas production.
Our Board of Directors has approved a 2011 base capital budget of $160 million. There is room to increase the final capital budget for 2011 but this will be determined in the third quarter based on commodity prices and drilling results. The primary objective of the 2011 capital program is to balance near-term operating and financial results with the selective evaluation of repeatable opportunities that have been assembled over the last three years. In 2011, NuVista's capital budget will be allocated almost exclusively to oil and liquids-rich natural gas plays in its Deep Basin and Eastern Alberta/Saskatchewan core regions.
We have planned an active drilling program for the remainder of the year. Commencement of our second quarter drilling activity will be determined by the end of spring break-up but we are not anticipating any unusual delays. Approximately two-thirds of our 2011 capital program will be spent in the second half of 2011. For the remainder of 2011, our drilling activity will continue to be focused on delivering near-term operating and financial results by drilling heavy oil wells in Saskatchewan and Eastern Alberta, and advancing our Wapiti Montney liquids-rich natural gas play. In addition, we plan to selectively drill Spirit River and Notikewin liquids-rich natural gas wells in our Pembina/Ferrier operating area and Cardium oil wells in our Pembina and Wapiti operating areas.
Our heavy oil plays in Saskatchewan and Eastern Alberta currently have the best risk/return profile of our opportunity inventory. While these plays do not have the same scope as some of our larger resource plays, their strong economics, lower drilling and completion costs and short cycle time allow them to deliver low risk near term operating and financial results. In Saskatchewan, we plan to drill development wells at our Zoller Lake and Hallam heavy oil projects and test four new Birdbear heavy oil prospects. In Eastern Alberta, we plan to drill development wells at our Wildmere project and test heavy oil prospects.
In January 2011, our Board of Directors approved a $70 million Wapiti Montney capital program, for the twelve month period beginning July 2011, in order to advance this play to the next stage of development. The purpose of this capital program is to understand the scope, costs and recoverable reserve potential of this play, as well as validate leases and licenses. NuVista has benefited from increased industry activity in this general area and industry results continue to indicate that this liquids-rich natural gas play has the potential to add significant reserves, production and long term value for our shareholders even in the current natural gas price environment. For the remainder of 2011, $35 million has been allocated to the Wapiti Montney play. We are planning to drill a total of three wells on our North and South blocks of land and begin construction of a compressor/dehydration facility at our North Block.
OUTLOOK
NuVista's Board of Directors has approved a 2011 base capital budget of $160 million. During 2011, we expect to drill approximately 60 gross wells with approximately 20 wells drilled in the first half of 2011 and 40 wells drilled in the second half. Capital spending of $20 million has been allocated to the second quarter, however, actual spending may be lower depending on the timing of access to leases after spring break-up. For the second half of 2011, capital spending is budgeted at $100 million with the ability to increase this amount, while still limiting spending to cash flow, if we experience higher commodity prices.
Based on a 2011 constrained capital budget of $160 million, facility outages experienced during the first half of 2011 and the disposition of properties in the second quarter, production for 2011 is forecast to average between 25,000 Boe/d and 26,000 Boe/d. First and second quarter third-party facility outages have impacted annual production volumes by approximately 250 Boe/d and our disposition of Pembina properties will impact annual production by approximately 200 Boe/d. Production volumes are expected to be lower in the first half of 2011 compared to the same period in 2010 as a result of lower spending in the fourth quarter of 2010 and the first half of 2011, unplanned and planned third-party facility outages and our shift to higher netback oil and liquids-rich natural gas production that add greater value but have lower average production additions on a Boe basis. Production volumes are expected to increase in the second half of 2011 even though $35 million of the capital program is being allocated to advance the Wapiti Montney play where incremental production is not expected until late 2011 or early 2012. We are forecasting NuVista's oil and liquids weighting to increase which, based on current commodity prices, should have a positive impact on our netbacks and cash flow. Based on NuVista's planned capital program, its oil and liquids weighting is expected to increase to approximately 35% of production at the end of 2011 compared to our weighting of 28% in the fourth quarter of 2010. 2011 funds from operations are forecast to be approximately $160 million based on the estimated production rate and current pricing assumptions of $3.90/Mcf for AECO natural gas, US$95/Bbl for WTI crude oil, a foreign exchange rate of 1.03, and including price risk management contracts currently in place. NuVista will continue to prudently manage its financial flexibility and forecasts a year end debt to funds from operation ratio of less than 2.0x.
For 2011, the natural gas supply/demand fundamentals continue to place downward pressure on natural gas prices and, as a result, we plan to carefully manage our business plan and financial flexibility to endure an extended period of weak prices. With a new leader in place, a talented and highly motivated workforce, improved financial flexibility and a business strategy focused on discipline, execution and profitability, we believe that our prudent strategy will result in superior performance over the long term. We would like to express our appreciation to our core shareholders for their support and the NuVista team for their ongoing commitment over the last few months as we made changes to our leadership and business model. We look forward to updating you on the progress of our 2011 business plan and longer term plans for shareholder value creation throughout the remainder of the year.
CONSOLIDATED FINANCIAL STATEMENTS AND MD&A
First quarter 2011 interim consolidated financial statements and notes to the interim 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 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; plans regarding new drilling and completion technology and the results therefrom; NuVista's planned capital budget; targeted debt level; the timing, allocation and efficiency of NuVista's capital program and the results therefrom; plans regarding facility construction and/or expansions, the timing thereof and the results therefrom; the anticipated potential of NuVista's asset base; forecast funds from operations; the source of funding of capital expenditures; the objectives and focus of the 2011 capital program and the allocation thereof and results therefrom; anticipated operating costs and other expenses; expectations regarding future commodity prices and netbacks; 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. 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.
Contact Information:
Jonathan Wright
President and CEO
(403) 538-8501
NuVista Energy Ltd.
Robert F. Froese
VP, Finance and CFO
(403) 538-8530
www.nuvistaenergy.com