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CALGARY, Aug. 26, 2011 /CNW/ - Novus Energy Inc. ("Novus" or the "Company") (TSXV: NVS) announces that it has filed its unaudited condensed interim financial statements and management's discussion and analysis ("MDA") as at and for the three and six months ended June 30, 2011. These may be accessed through the SEDAR website www.sedar.com and at the Company's website www.novusenergy.ca.
Novus is pleased to report that its 2011 Viking oil drilling program continues to progress on schedule. The Company has now successfully drilled 39 Viking oil wells in the Dodsland area of Saskatchewan, with 32 of these wells having been completed. Thirty of the wells that have been completed have been placed on production, with the remainder to follow. Costs in the greater Dodsland area continue to meet the Company's budget, with estimated per well costs for drilling and completions on the Company's first 32 wells averaging approximately $835,000.
Total estimated field level corporate production as of August 25, 2011 was approximately 2,625 boe/d, with approximately 78% of production comprised of oil and liquids. Novus expects production will continue to steadily increase through the balance of the year as additional wells are drilled and placed on production. The Company expects to show significant production growth in the second half of the year and expects to comfortably meet its 2011 exit rate guidance of 3,000 boe/d, weighted 80% to oil and liquids production, early in the fourth quarter.
With recent land acquisitions in the Dodsland area, Novus now controls 124.25 net sections of Viking rights, and has identified 601 net risked, undrilled Viking oil locations.
For the three months ended June 30, 2011, Novus' gross revenue increased
168% to $8.29 million compared to $3.09 million recorded in the
comparative period in 2010. For the six months ended June 30, 2011,
gross revenue was $17.16 million, compared to $6.08 million in the
comparative period of 2010, representing a 182% increase.
Funds flow from operations was $2.94 million in the second quarter of
2011, versus an outflow of $711 thousand for the comparative three
month period of 2010. For the first half of 2011, funds flow from
operations was $6.15 million, compared to an outflow of $796 thousand
recorded in the first half of 2010.
Novus' capital program for the three month period ended June 30, 2011,
was $18.13 million, versus $20.13 million spent in the comparative
period of 2010. Novus' capital program for the first six months of the
year was $30.38 million, compared to $26.06 million spent in the first
six months of 2010. These figures are exclusive of the non-cash
transactions and business combinations, which occurred in 2010.
Subsequent to quarter end, the Company increased its credit facilities
to $60 million, consisting of a $50 million revolving operating demand
loan and a $10 million acquisition/development demand loan. The
Company's borrowing capacity has increased substantially from the $28
million of credit facilities which were available to it at the
beginning of 2011.
At June 30, 2011, the Company had net debt of $23.85 million.
- The Company currently has outstanding 22.64 million in-the-money warrants expiring March 31, 2012, which, upon exercise, would result in proceeds of $16.98 million being realized by the Company.
Average daily production for the second quarter of 2011 increased 70% to
1,318 boe/d compared to 774 boe/d recorded in the corresponding period
in 2010. Average daily production for the first six months of 2011 was
1,430 boe/d, up 93% from the 742 boe/d recorded in the corresponding
period in 2010.
Average crude oil and liquids production for the second quarter of 2011
was up 162% to 844 bbls/d versus 322 bbls/d in the comparative quarter
of 2010. Natural gas production averaged 2,841 mcf/d for the second
quarter of 2011, a 5% increase from 2,717 mcf/d in the comparative
period of 2010.
Average crude oil and liquids production for the first six months of
2011 was up 215% to 940 bbls/d versus 298 bbls/d in the comparative
period of 2010. Natural gas production averaged 2,940 mcf/d, a 10%
increase from 2,669 mcf/d in the comparative period of 2010.
Current production is approximately 2,625 boe/d, weighted 78% towards
oil and liquids.
During the second quarter of 2011, Novus participated in the drilling of
19 wells (19.0 net), 14 of which were Viking horizontal oil wells in
the greater Dodsland area. Fifteen wells (15.0 net) were completed,
with six of them onstream by June 30, 2011.
Novus now controls 124.25 net sections in its Dodsland Viking core area,
and has a multi-year risked drilling inventory of 601 net Viking
horizontal oil wells.
Novus acquired a 100% working interest in approximately 55 net sections
of land with rights in the oil bearing Birdbear formation of
southwestern Saskatchewan. This acquisition complements the 24 net
sections of land Novus currently owns targeting this formation. These
lands are located in the immediate vicinity of the Company's Dodsland
Viking lands and provide the Company with an exciting opportunity to
target another prolific, emerging oil resource play, while maintaining
operational synergies. The Company will likely be dedicating some of
this year's capital expenditure program towards the shooting of 3D
seismic and the potential drilling of a number of Birdbear locations.
- The upgrades at Novus' owned and operated facilities at Whiteside and Avon Hills have now been completed. Gas production from the Whiteside area is currently being conserved with a number of additional pipelines being surveyed to handle new solution gas volumes from our current drilling program.
In the first half of 2011, Novus drilled 17 net horizontal Viking oil wells. Completion operations were hampered by wet weather, and production from the wells was not tied in until the end of the second quarter and early in the third quarter of the year. With completion operations delayed, the Company's Viking oil drilling program did not materially contribute to production levels in the second quarter of 2011. Production for the second quarter of 2011 was also impacted by prolonged third party plant maintenance at Wembley which resulted in production from the area being shut-in for nearly six weeks of the quarter. Prior to, and subsequent to being shut-in, the Wembley property was producing approximately 180 boe/d.
Novus is pleased with the performance of the wells and the stable nature of the production to date from its current drilling program. The Company has drilled wells in its Flaxcombe, Whiteside, Kerrobert, Forgan, Plato, Plenty and Dodsland regions that are expected to meet or exceed internal type curve forecasts of 48 bbls/d of initial oil production. The Company now has several wells with at least 60 days of production history, and these wells are now averaging 64 bbls/d of oil per well. Results from the Flaxcombe sub area in the Dodsland region have been extremely encouraging. The Company has determined that these previously undrilled lands are characterized by two distinct cycles in the Viking formation. The Company has now drilled horizontal wells targeting both the lower and upper cycle. Current production rates from wells in this area which have been on production for at least 60 days are 80 bbls/d of oil per well. Virgin pressures realized on these wells have been up to 7,600 KPa which are amongst the highest pressures the Company has recorded in any of its Viking wells drilled thus far. Novus has mapped over ten sections of its lands where both cycles are present and expects this area to add at least 80 drilling locations to its existing drilling inventory of 601 net Viking oil locations. Reserves and production growth will also increase as development of the two distinct Viking cycles progresses. Production from the recently drilled wells has far exceeded expectations, and is supportive of the longer term potential the Company believes the area exhibits.
Based upon the production rates, recoverable reserves, and drilling and completion costs in the Dodsland area the Company has experienced to date, Novus plans on maintaining an aggressive drilling program on its current acreage, and will continue its efforts to further consolidate and expand its position within the area through acquisitions. Novus has been one of the most active operators in the Dodsland area, and with the success it has enjoyed to date, the Company plans to continually expand its already significant position in the area. Novus is also excited to commence drilling operations shortly on its first horizontal Viking light oil well in Alberta. Based upon success, the Company would pursue numerous other locations in the area throughout 2012.
Novus will be operating approximately 98% of the capital expenditures it incurs in 2011, which gives the Company significant flexibility on the timing and scale of its capital program. Novus is well positioned financially, and as operator of the vast majority of its capital program, the Company has the flexibility to accelerate its drilling with continued success.
A summary of financial and operational results for the three and six month periods ended June 30, 2011, along with the comparative periods, are outlined in the following table:
|Three months ended June 30||Six months ended June 30|
(000s, except per share amounts)
|Funds flow from (used in) operations||2,938||(711)||6,146||(796)|
|per share - basic and diluted||0.02||-||0.04||(0.01)|
|per share - basic and diluted||-||0.03||0.01||0.04|
|Capital expenditures, net||18,130||20,131||30,382||26,063|
|Weighted average shares outstanding||170,018||153,288||169,138||141,102|
|Three months ended June 30||Six months ended June 30|
|Oil liquids (bbls/d)||844||322||940||298|
|Oil equivalent (boe/d)||1,318||774||1,430||742|
|Sales price per unit|
|Oil liquids ($/bbl)||94.36||68.14||88.38||69.74|
|Oil equivalent ($/boe)||69.09||43.81||66.27||45.21|
INTERNATIONAL FINANCIAL REPORTING STANDARDS
On January 1, 2011, the Company adopted International Financial Reporting Standards ("IFRS") for financial reporting purposes, using a transition date of January 1, 2010. The unaudited condensed interim financial statements as at and for the three and six months ended June 30, 2011, have been prepared in accordance with IFRS. Comparative information has been restated from the previously published financial statements which were prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP").
NON-GAAP FINANCIAL MEASUREMENTS
Included in this press release are references to certain financial measures commonly used in the oil and gas industry, such as funds flow from (used in) operations, operating netbacks and net debt. These measures have no standardized meanings, are not defined by IFRS or Canadian GAAP, and accordingly are referred to as non-GAAP measures.
The Company considers funds flow from (used in) operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to repay debt and to fund future growth through capital investment. Novus determines funds flow from (used in) operations as cash provided by (used in) operating activities prior to changes in non-cash working capital items and decommissioning expenditures. The determination of the Company's' funds flow from (used in) operations may not be comparable to the same as reported by other companies.
Operating netbacks are calculated by deducting royalties, field operations and transportation and marketing expenses from production revenue. Operating netbacks are used by management to assess operating results between periods and between peer companies as they provide an indication of results generated by the Company's principal business activities before the consideration of how these activities are financed or how the results are taxed. Novus' reported amounts may not be comparable to similarly titled measures reported by other companies. These terms should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined by IFRS or Canadian GAAP as an indicator of the Company's performance or liquidity.
Net debt is calculated as current assets less all current liabilities, including the current portion of any bank debt. The Company monitors net debt as part of its capital structure.
Reported production represents Novus' ownership share of sales before the deduction of royalties. Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas has been converted at a ratio of six thousand cubic feet to one boe. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe's may be misleading, particularly if used in isolation. References to natural gas liquids ("liquids") include condensate, propane, butane and ethane and one barrel of liquids is considered to be equivalent to one boe.
Novus Energy Inc. is a well positioned, junior oil and gas company with a proven management team committed to aggressive, cost-effective growth of high netback light oil reserves and production. Novus will continue to grow through a targeted acquisition and consolidation strategy coupled with development and exploration drilling.
Novus Shares trade on the TSX Venture Exchange under the symbol NVS. Novus currently has 169.6 million common shares outstanding.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release will not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. Such securities have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States, or to a U.S. person, absent registration, or an applicable exemption therefrom.
ADVISORY REGARDING FORWARD LOOKING STATEMENTS
Certain disclosures set forth in this press release constitute forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believes", "budget", "continue", "could", "estimate", "expects", "forecast", "intends", "may", "plan", "predicts", "projects", "should", "will" and other similar expressions. All estimates and statements that describe the Company's future, goals, or objectives, including Management's assessment of future plans and operations, may constitute forward-looking information under securities laws. Forward-looking statements involve known and unknown risks and uncertainties which include, but are not limited to: exploration, development and production risks; assessments of acquisitions; reserve measurements; availability of drilling equipment; access restrictions; permits and licenses; aboriginal claims; title defects; commodity prices; commodity markets; transportation and marketing of crude oil, liquids and natural gas; reliance on operators and key personnel; competition; corporate matters; funding requirements; access to credit and capital markets; market volatility; cost inflation; foreign exchanges rates; general economic and industry conditions; environmental risks; Kyoto protocol; and government regulation and taxation.
Forward-looking statements relate to future events and/or performance and although considered reasonable by Novus at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made. Novus does not undertake any obligation to publicly update forward-looking information except as required by applicable securities law.