CALGARY, ALBERTA--(Marketwired - Dec. 13, 2016) - Gear Energy Ltd. ("Gear" or the "Company") (TSX:GXE) is pleased to provide the following update to shareholders.
OPERATIONS UPDATE
Throughout the fourth quarter of 2016 Gear completed the following items of note:
2017 BUDGET
Gear is pleased to announce a 2017 capital budget of $45 million, targeting low risk production growth of approximately 15 per cent (fourth quarter to fourth quarter) with an annual average production rate of 6,400 boe per day and an estimated 2017 exit rate of approximately 7,200 boe per day. Capital investment is expected to more than offset the estimated 30 per cent base decline by focusing primarily on the continuation of high return development drilling through 2016. Management intends to fully fund the 2017 growth budget with forecasted cash flow at the current strip WTI oil price of approximately US $53 per barrel. Gear anticipates maintaining a strong balance sheet through 2017 with a forecasted reduction in the annual net debt to cash flow ratio to approximately 0.8 times. Gear will continue to monitor prices throughout the year with a vision to potential budget expansion if oil prices strengthen, however the focus will remain on the delivery of strong project returns and the maintenance of a solid balance sheet.
2017 Guidance | ||
Annual Production (boe/d) | 6,400 | |
Per cent heavy oil (%) | 62 | |
Per cent light/medium oil & NGLs (%) | 24 | |
Royalties (%) | 10 | |
Operating and Transportation Costs($/boe) | 15.50 | |
G&A Costs ($/boe) | 2.15 | |
Interest Costs ($/boe) | 0.70 | |
Capital and Abandonment Expenditures ($ million) | 45 | |
Planned Wells | 38 gross (37 net) |
Forward-looking Information and Statements
This press release contains certain forward-looking information and statements 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", "strategy" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains forward-looking information and statements pertaining to the following: expected timing for completing fracture stimulation of new wells; expected fourth quarter 2016 production; expected 2017 net debt to cash flow ratio; intent to continue to monitor prices to maintain project returns and a strong balance sheet; expectation that Gear will be able to fully fund the 2017 capital budget with forecasted cash flow based on current strip prices; intent to complete abandonment and reclamation projects to maintain a strong corporate liability ratio in both Alberta and Saskatchewan; details of expected 2017 capital budget including number of wells to be drilled, associated costs and other capital expenditures, base decline rates and the expectation that capital development will more than offset such decline rates; expectations with respect to commodity weighting, revenue, royalties, operating costs, G&A and interest costs; expected production; expectations of future commodity prices and differentials.
The forward-looking information and statements contained in this press release reflect several material factors and expectations and assumptions of Gear including, without limitation: that Gear will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the accuracy of the estimates of Gear's reserves and resource volumes; certain commodity price and other cost assumptions; and the continued availability of adequate debt and equity financing and cash flow from operations to fund its planned expenditures. Gear believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.
To the extent that any forward-looking information contained herein may be considered a financial outlook, such information has been included to provide readers with an understanding of management's assumptions used for budgeting and developing future plans and readers are cautioned that the information may not be appropriate for other purposes. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Gear's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Gear or by third party operators of Gear's properties, increased debt levels or debt service requirements; inaccurate estimation of Gear's oil and gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time to time in Gear's public documents including in Gear's most current annual information form which is available on SEDAR at www.sedar.com.
The forward-looking information and statements contained in this press release speak only as of the date of this press release, and Gear does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.
NON-GAAP Measures
This press release contains the terms cash flow from operations and net debt, which do not have standardized meanings under Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable with the calculation of similar measures by other companies. Management believes that these key performance indicators and benchmarks are key measures of financial performance for Gear and provide investors with information that is commonly used by other oil and gas companies. Cash flow from operations is calculated as cash flow from operating activities before changes in noncash operating working capital and decommissioning liabilities settled. Net debt is calculated as debt less current working capital items, excluding risk management contracts. Additional information relating to certain of these non-GAAP measures, including the reconciliation between cash flow from operations and cash flow from operating activities, can be found in the MD&A.
Barrels of Oil Equivalent
Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six Mcf to one Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Additionally, 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 ratio of 6:1 may be misleading as an indication of value.
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