Press release from Marketwire
Spartan Oil Corp. Announces Upward Revision to 2012 Capital Program and Guidance and Provides Operations Update
Wednesday, April 04, 2012
CALGARY, ALBERTA--(Marketwire - April 4, 2012) - Spartan Oil Corp. ("Spartan" or the "Company") (TSX:STO) is pleased to announce that its Board of Directors has approved an increase in the Company's 2012 capital program to $127 million (previously $80 million). Encouraged by continued drilling success, Spartan will direct the increased capital towards the Company's Cardium light oil development project at Keystone, in central Alberta. Under the revised budget, Spartan will drill up to 49 (46.6 net) Cardium horizontal wells during 2012. Spartan expects to drill at least 5 (4.9 net) wells through break-up with its existing rig and the Company has secured a second rig commencing on June 1.
Spartan expects its revised 2012 budget to yield average production in the range of 2,600 - 2,800 boe/d (83% oil and liquids) and exit production of 4,300 - 4,500 boe/d (84% oil and liquids). Cash flow is anticipated to be $47 - $50 million in 2012. Key budget assumptions include:
|Crude oil||= WTI US $85.00 per barrel|
|Natural gas||= Cdn. $2.75 per mcf|
|Exchange rate||= US/Cdn. $0.99|
|Operating costs||= $11.60 per boe|
|Operating Netback||= $49.75 per boe|
|Net G&A||= $1.40 per boe|
Spartan will finance its revised 2012 budget entirely from existing cash on hand and internal cash flow. Under the revised budget, Spartan will exit 2012 with no debt and with $4 - $7 million of positive working capital. Annualized full year cash flow based upon the Company's forecast exit production guidance and the financial assumptions used in Spartan's 2012 budget is approximately $78 - $83 million.
To date in 2012, Spartan has drilled a total of 12 (10.3 net) horizontal wells targeting Cardium oil at Spartan's Keystone property. This brings the total well count to 27 (22.1 net) horizontal wells drilled since Spartan commenced operations on June 1, 2011.
Spartan has utilized several different completion techniques in an effort to maximize the productivity of the wells including, oil based fracs, nitrified surfactant foam fracs, gelled water fracs and slick water fracs. We have seen improvements in both productivity and costs as a result of these efforts. Of the wells drilled to date in 2012, 2 (1.5 net) have been completed with nitrified surfactant foam fracs, 6 (5.9 net) have been completed with slick water fracs and 1 (0.97 net) has been completed with a gelled water frac. Results are still preliminary, however, the Company is very encouraged by the initial results from the slick water fracs. There is not enough production data available to date to assess the results on the gelled water completion.
As an example of this, the company recently completed two wells in the interior of Unit 2 which are in close proximity to each other. One of the wells was completed with a 17 stage slick water frac and the other was completed with a 17 stage nitrified surfactant foam frac. The IP30 rate for the well that received the slick water frac treatment was 145 bbl/d (oil). The other well achieved an IP30 rate of 119 bbl/d (oil). Spartan's unrisked type well for the interior of the Unit has an IP30 rate of 120 bbl/d (oil).
Spartan currently has a total of 25 (17.9 net) Cardium horizontal oil wells producing in the Keystone area and an additional 5 (4.9 net) Cardium horizontal wells awaiting completion and/or tie-in. Current production is approximately 2,300 boe/d, based on field estimates.
Spartan's Keystone property is a high netback, light oil asset characterized by significant original oil in place and a low recovery factor. Spartan has a multi-year, low risk drilling inventory at Keystone. Based upon the assumptions in our 2012 capital budget, the Keystone property will generate considerable free cash flow above and beyond maintenance capital required to keep production flat. Spartan estimates that it will be required to reinvest approximately 40% - 45% of the cash flow generated by the Keystone properties in 2013 to maintain production at forecast 2012 exit levels, leaving significant free cash flow available to fund additional growth.
Spartan Oil Corp.
The Company is engaged in the business of acquiring crude oil and natural gas properties and exploring for, developing and producing oil and natural gas in western Canada. Spartan is uniquely positioned with a significant position in two of the leading oil resource plays in western Canada, being the Cardium light oil play in central Alberta and the Bakken light oil resource play in southeast Saskatchewan.
This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Spartan. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
In the interest of providing Spartan shareholders and potential investors with information regarding the Company, including management's assessment of Spartan's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves 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 statements. Spartan believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements.
The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release.
Except as required by law, Spartan does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil.
FOR FURTHER INFORMATION PLEASE CONTACT:
Richard F. McHardy Spartan Oil Corp. President & CEO (403) 457-4006 (403) 457-4028 (FAX)
Michelle A. Wiggins Spartan Oil Corp. Vice President Finance & CFO (403) 457-4006 (403) 457-4028 (FAX)
1400, 606 - 4th Street SW Spartan Oil Corp. Calgary, Alberta