The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Cequence Closes Equity Financing and Increases 2011 Guidance

Thursday, August 18, 2011

Cequence Closes Equity Financing and Increases 2011 Guidance08:34 EDT Thursday, August 18, 2011/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.  ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./CALGARY, Aug. 18, 2011 /CNW/ - Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: CQE) is pleased to announceit has closed its previously announced "bought deal" short form prospectus offering of 11,960,000 common shares in the capital of Cequence (including 1,560,000 common shares issued pursuant to the exercise of an over-allotment option previously granted to the underwriters) at a price of $3.85 per share and 2,110,000 CEE flow-through common shares at $4.75 per share for total gross proceeds of $56.1 million. The public offering was conducted through a syndicate of underwriters led by Peters & Co. Limited and including Cormark Securities Inc., Stifel Nicolaus Canada Inc., CIBC World Markets Inc. and GMP Securites L.P.Upon closing of this equity issue and incorporating the proceeds of $9.8 million from the exercise of CDE flow-through warrants on August 15, 2011 and the recently announced agreement to sell certain non-core assets for $16.4 million, pro-forma net debt and working capital at the end of the second quarter would be a positive balance of $14.6 million.Cequence intends to take advantage of its strong balance sheet and further delineate its asset base. In this regard, the Company is increasing its 2011 capital program by approximately $50 million to a total of $150 million. Total capital expenditures for the year, including acquisition and disposition activity, are budgeted to be $126million, an increase of $55million from guidance previously provided on March 23, 2011. The Company plans to drill 10 to 12 net horizontal wells at Simonette prior to the 2011 year end, targeting pool extensions in the Montney and Wilrich formations as well as exploratory wells to test new prospects. Net debt at year end is forecast to be approximately $50 to $55million. This planned drilling activity is back-end weighted and production from the incremental wells is not expected to add material production volumes until late in 2011 and the first quarter of 2012.As a result of the above, average production for 2011 is now forecast to increase to 9,400 boepd and exit production is forecast to increase from 10,000 to 11,000 boepd. Production for the first quarter of 2012 is expected to reach 12,500 to 13,500 boepd.Cequence is confident that it will be able to procure all necessary services to complete a robust drilling program through 2012. Management intends to maintain the Company's financial flexibility while closely monitoring market conditions and commodity prices over the coming months. We intend to maintain our strong balance sheet as we continue to develop our asset base.Management provides the following updated guidance which has been approved by the Cequence board of directors.            Old Guidance   New Guidance                 Average 2011 production, BOE/d                       9,200               9,400Exit 2011 production, BOE/d                       10,000               11,000Capital expenditures 2011 ($ 000's)                       100,000               150,000Acquisitions ($ 000's)                       -               22,200Dispositions ($ 000's) (1)                       (29,000)               (45,900)Wells drilled, net                       12               16 - 18Equity issued, gross ($ 000's)                       51,500               112,600Operating costs ($)                       $9.60               $9.00Royalties (% revenue)                       12               13Crude - WTI (Cdn$/bbl)                       $95.00               $97.50Natural gas - AECO (Cdn$/GJ)                       $3.50               $3.63Funds flow from operations ($)                       $45-50million               $45-50millionDecember 31, 2011 Net debt ($)                       $40-45million               $50-55millionBasic shares outstanding, Dec 31 2011                       144.75 million               161.17 millionNotes:   (1) Includes the planned dispositions of properties in the third quarter of 2011 with production as of June 30, 2011 of approximately 450 BOE/d.Cequence is a publicly traded Canadian energy company involved in the acquisition, exploitation, exploration, development and production of natural gas and crude oil in western Canada.  Further information about Cequence may be found in its continuous disclosure documents filed with Canadian securities regulators at www.sedar.com. Cequence has updated its presentation which is available on the Company's website at www.cequence-energy.com.Forward-Looking InformationCertain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to the completion of the sale of non-core assets, capital expenditure plans and the timing thereof, drilling plans, future net debt, capital expenditures, and increases in production volumes and the timing thereof. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Cequence believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because Cequence can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: the ability of Cequence to complete the sale of non-core assets; the timely receipt of any required regulatory approvals; field production rates and decline rates; the ability of Cequence to secure adequate product transportation; the ability of Cequence to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; Cequence's ability to operate the properties in a safe, efficient and effective manner; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability of Cequence to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Cequence and described in the forward-looking information. The material risk factors affecting Cequence and its business are contained in Cequence's Annual Information Form which is available under Cequence's issuer profile on SEDAR at www.sedar.com.The forward-looking information contained in this press release is made as of the date hereof and Cequence undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.Non- GAAP Measures The press release contains references to terms commonly used in the oil and gas industry. These measures include "funds flow from operations". This measure is not defined under International Financial Reporting Standards ("IFRS") and should not be considered in isolation or as an alternative to conventional IFRS measures. This measure is not necessarily comparable to a similarly titled measure of another company. Specifically, management of Cequence uses funds flow from operations as it is a non-GAAP measure used extensively in the Canadian energy sector for comparative purposes. Cequence defines the term "funds flow from operations" as cash flow from operating activities before adjustments for asset retirement expenditures, proceeds from sale of commodity contracts and net changes in non-cash working capital. Cequence evaluates its performance based on earnings and funds flow from operations. Cequence considers funds flow from operations a key measure as it demonstrates Cequence's ability to generate the cash flow necessary to fund future growth through capital investment and to repay debt. Cequence's calculation of funds flow from operations may not be comparable to that reported by other companies.Non-GAAP measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.Additional AdvisoriesBOEs means barrels of oil equivalent and are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.The Company's outlook and guidance for 2011 and 2012 has been provided to assist readers in analyzing the Company's anticipated development strategies and prospects. Such outlook and guidance may not be appropriate for other purposes and actual results could differ from the guidance provided above and is expressly qualified by the risks and assumptions set forth under "Forward-Looking Information".The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.  The Common shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.   For further information: Paul Wanklyn, President and Chief Executive Officer, (403) 218-8850, pwanklyn@cequence-energy.com; or David Gillis, Vice President, Finance and Chief Financial Officer, (403) 806-4041, dgillis@cequence-energy.com