NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES
Birchcliff Energy Ltd. ("Birchcliff") (TSX:BIR) is pleased to announce its
strong financial and operational results for the first quarter of 2013 with a
continued decrease in per unit cash costs, an increase in its credit facilities,
an increase of its 2013 budget, an increase in fourth quarter and exit
production guidance, a Phase IV expansion of its major gas plant and an
operational update. The full 2013 First Quarter Report, containing the unaudited
interim condensed financial statements for the three month period ended March
31, 2013 and the related Management's Discussion and Analysis, is available on
Birchcliff's website at www.birchcliffenergy.com and will be available on SEDAR
at www.sedar.com.
Current Highlights
-- Capital budget increased to $246.6 million, from $184.6 million.
Expanded portion of the 2013 capital budget is primarily directed toward
the drilling of 5 (5.0 net) additional Montney/Doig horizontal natural
gas wells and $21.3 million for our recent land acquisition in the Pouce
Coupe area on the Montney/Doig Natural Gas Resource Play.
-- Increased fourth quarter 2013 average production in the range of 28,000
to 29,000 boe per day, which significantly exceeds our previous 2013
exit guidance of 28,000 boe per day. Increased our 2013 exit production
guidance to approximately 30,000 boe per day.
-- Increased credit facilities to $600 million, from $540 million.
-- Board approval of Phase IV expansion of Pouce Coupe South natural gas
plant ("PCS Gas Plant") to 180 MMcf per day in 2014, expanding natural
gas processing capacity from 150 MMcf per day, for a cost of
approximately $10 million.
First Quarter Highlights
-- Production per common share increased by 11%. Production averaged 26,108
boe per day, a 24% increase from 21,016 boe per day in the first quarter
of 2012.
-- Funds flow increased by 51%. Funds flow of $39.4 million or $0.28 per
common share, an increase from $26.2 million or $0.21 per common share
in the first quarter of 2012.
-- Net income of $7.4 million, increased 99% from the first quarter of
2012.
-- Top tier operating costs of approximately $0.28 per Mcfe or $1.68 per
boe at our PCS Gas Plant, where we processed 68% of our natural gas
production. On a corporate basis, reduced our operating costs to $5.77
per boe, a decrease of 6% from $6.17 per boe in the first quarter of
2012.
-- Total cash costs per boe decreased 19% to $15.43, resulting in funds
flow netback increasing by 23% to $16.79 per boe from the first quarter
of 2012. General and administrative cash costs decreased 49% to $2.08
per boe from the first quarter of 2012.
-- Net future horizontal drilling locations on our Montney/Doig Natural Gas
Resource Play increased to 2,032, from 1,929 net locations at December
31, 2012. Purchased 13.5 (13.5 net) sections in the heart of our Pouce
Coupe area and very proximal to our current drilling activities, our PCS
Gas Plant and our other existing infrastructure.
2013 FIRST QUARTER FINANCIAL AND OPERATIONAL HIGHLIGHTS
------------------------------
Three months Three months
ended ended
March 31, 2013 March 31, 2012
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OPERATING
Average daily production
Light oil - (barrels) 4,047 4,575
Natural gas - (thousands of cubic feet) 128,101 95,242
NGLs - (barrels) 710 612
Total - barrels of oil equivalent (6:1) 26,108 21,061
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Average sales price ($ CDN)
Light oil - (per barrel) 84.82 90.10
Natural gas - (per thousand cubic feet) 3.40 2.32
NGLs - (per barrel) 86.80 93.08
Total - barrels of oil equivalent(6:1) 32.21 32.77
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Undeveloped land
Gross (acres) 558,454 533,642
Net (acres) 521,488 496,094
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NETBACK AND COST ($ per barrel of oil
equivalent at 6:1)
Petroleum and natural gas revenue 32.22 32.78
Royalty expense (2.74) (3.79)
Operating expense (5.77) (6.17)
Transportation and marketing expense (2.25) (2.36)
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Netback 21.46 20.46
General & administrative expense, net (2.08) (4.11)
Interest expense (2.59) (2.68)
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Funds flow netback 16.79 13.67
Stock-based compensation expense, net (0.55) (0.86)
Depletion and depreciation expense (11.51) (11.57)
Accretion expense (0.20) (0.22)
Amortization of deferred financing fees (0.08) (0.10)
Gain on sale of assets - 2.02
Income tax expense (1.29) (0.99)
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Net income 3.16 1.95
Preferred share dividends (0.43) -
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Net income available to common shareholders 2.73 1.95
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FINANCIAL
Petroleum and natural gas revenue ($000) 75,718 62,833
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Funds flow from operations ($000)(1) 39,444 26,196
Per common share - basic ($)(1) 0.28 0.21
Per common share - diluted ($)(1) 0.27 0.20
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Net income ($000) 7,424 3,731
Net income available to common shareholders
($000)(2) 6,424 3,731
Per common share - basic ($)(2) 0.05 0.03
Per common share - diluted ($)(2) 0.04 0.03
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Common shares outstanding
End of period - basic 142,096,130 127,005,577
End of period - diluted 164,106,949 140,152,250
Weighted average common shares for period -
basic 141,821,280 126,753,764
Weighted average common shares for period -
diluted 144,366,102 131,008,290
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Capital expenditures ($000) 81,010 119,852
Dividends on preferred shares ($000) 1,000 -
Working capital deficit ($000) 50,920 87,552
Non-revolving five-year term credit facility
($000) 67,979 68,267
Revolving credit facilities ($000) 383,392 374,064
Total debt ($000) 502,291 529,883
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(1) Funds flow from operations and funds flow per common share amounts are
non-GAAP measures that represent cash flow from operating activities,
before the effects of changes in non-cash working capital and
decommissioning expenditures.
(2) Net income per common share amounts are calculated using net income
available to Birchcliff's shareholders, adjusted for any preferred share
dividends paid and divided by the weighted average number of common
shares outstanding for the period.
The full text of the President's Message from the 2013 First Quarter Report follows:
May 15, 2013
Fellow Shareholders,
Birchcliff Energy Ltd. ("Birchcliff") is pleased to report its first quarter
financial and operational results for the three month period ended March 31,
2013. Birchcliff had an excellent operational quarter. Production, funds flow,
earnings and revenue have increased, while cash costs per boe have decreased.
Production was ahead of our internal budget.
In the first quarter of 2013, we reduced our operating costs to an average of
$5.77 per boe, a decrease of 6% from the first quarter of 2012. Notably,
operating costs at Birchcliff's 100% owned Pouce Coupe South natural gas plant
("PCS Gas Plant") were $0.28 per Mcfe ($1.68 per boe). We processed 68% of our
natural gas production at the PCS Gas Plant and anticipate increasing that
percentage as new Montney/Doig horizontal natural gas wells drilled in 2013
produce to the PCS Gas Plant, which will further reduce our corporate operating
costs on a per boe basis.
Total cash costs per boe, including royalties, operating costs, transportation
and marketing costs, general and administrative expense and interest, decreased
19% from the first quarter of 2012. This resulted in a funds flow netback of
$16.79 per boe, a 23% increase from the first quarter of 2012. Notably, general
and administrative costs decreased 49% to $2.08 per boe, from the first quarter
of 2012.
We are extremely excited about the significant land purchase we made in the
first quarter of 2013. We purchased 13.5 sections of Crown land at 100% working
interest that is very proximal to our PCS Gas Plant, for $21.3 million. This is
a very strategic acquisition for Birchcliff. With the success of the
Montney/Doig Natural Gas Resource Play in the area, there are a limited number
of sections of Crown land remaining. The newly acquired lands are contiguous
with our existing land base and we expect a significant amount of probable
reserves and discovered resources to be attributed to these newly acquired Crown
lands at year-end.
These lands are highly prospective for both the Basal Doig/Upper Montney Play
and the Middle/Lower Montney Play. On the basis of the full development of four
wells per section, per Play, the recently acquired lands add 108 net future
potential horizontal natural gas well drilling locations, all within the
existing infrastructure reach of our PCS Gas Plant. These recent additions
increase Birchcliff's number of Montney/Doig Natural Gas Resource Play future
potential horizontal drilling locations to 2,032 net locations.
On May 9, 2013, Birchcliff's bank syndicate increased our credit facilities to
an aggregate credit limit of $600 million by adding a new $60 million
non-revolving five-year term credit facility. This credit facility better aligns
Birchcliff's long-term assets with its long-term debt.
Birchcliff was profitable when AECO natural gas price averaged $2.39 per Mcf in
2012, and currently the AECO gas price is about $3.35 per Mcf. Accordingly, with
our total cash costs per boe decreasing, and with increased natural gas prices,
our expected future profitability outlook has materially improved.
In light of all of the above, Birchcliff's 2013 capital budget has increased to
$246.6 million, from $184.6 million. We expect fourth quarter average production
to be in the range of 28,000 to 29,000 boe per day (well ahead of our previous
exit guidance of 28,000 boe per day). Our 2013 exit production is expected to be
approximately 30,000 boe per day. This increased exit production will provide
Birchcliff with momentum for a strong production profile in the first quarter of
2014. Our estimated 2013 average production guidance of 26,400 boe per day has
not changed as the majority of Birchcliff's new production in 2013 will come on
stream late in the year.
The expanded portion of the 2013 capital budget is primarily directed toward the
drilling of 5 (5.0 net) additional Montney/Doig horizontal natural gas wells,
four of which will produce to our PCS Gas Plant and $21.3 million for our land
acquisition in the Pouce Coupe area, which we purchased in the first quarter of
2013.
Birchcliff has available processing capacity at the PCS Gas Plant and with
current gas prices, the economics of processing natural gas at our PCS Gas Plant
are very strong. Accordingly, we are increasing our production to make use of
this capacity. With the investment we have made in the PCS Gas Plant, our goal
is to fully utilize its capacity and eventually fill the PCS Gas Plant with
Birchcliff's natural gas production.
Increase to Credit Facilities
Birchcliff's bank syndicate approved a new $60 million non-revolving five-year
term credit facility with a maturity date in May 2018, increasing the syndicated
credit facilities to an aggregate of $600 million from the previous credit limit
of $540 million. The terms of the other credit facilities, a $70 million
non-revolving five-year term credit facility and extendible revolving credit
facilities of $470, remain unchanged, including the two-year term-out feature of
the revolving credit facilities. The increased aggregate credit facility amount
will provide Birchcliff with increased financial flexibility.
Capital Budget Expansion
Birchcliff has expanded its capital budget for 2013 to $246.6 million from
$184.6 million. The capital program will be funded from funds flow and debt. The
expanded portion of the 2013 capital budget is primarily directed toward the
drilling of 5 (5.0 net) additional Montney/Doig horizontal natural gas wells,
four of which will produce to our PCS Gas Plant, and $21.3 million for our
recent land acquisition in the Pouce Coupe area. The following table sets out a
detailed comparison of the new capital budget to the original capital budget.
------------------------------------
Net Capital
Gross Wells Net Wells (MM$)
------------------------------------
2013 Capital Budget New Old New Old New Old
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Drilling & Development
Basal Doig/Upper Montney Horizontal
Natural Gas Wells 2 2 2.0 2.0 11.6 11.6
Middle/Lower Montney Horizontal
Natural Gas Wells 20 15 20.0 15.0 119.1 89.8
Montney/Doig Vertical Exploration Gas
Well 1 1 1.0 1.0 4.6 4.6
Worsley Charlie Lake Horizontal Oil
Wells 11 10 11.0 10.0 39.5 34.7
Halfway Oil Wells 4 3 2.5 2.0 9.8 8.0
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Total Drilling & Development 38 31 36.5 30.0 184.6 148.7
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Facilities 8.5 9.6
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Production Optimization 16.5 11.7
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Land 28.0 9.2
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Acquisitions & Dispositions -0.5 0.0
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Seismic & Other 9.5 5.4
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Total Net Capital 246.6 184.6
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PCS Gas Plant Phase IV Expansion
Birchcliff's Board of Directors has approved a Phase IV expansion of the PCS Gas
Plant in 2014, expanding processing capacity to 180 MMcf per day from 150 MMcf
per day by adding additional compression and sales pipeline capacity. The
estimated cost of the Phase IV expansion is approximately $10 million, with the
majority of the costs to be incurred in 2014. The anticipated start-up date of
the Phase IV expansion is in the fall of 2014.
2013 FIRST QUARTER FINANCIAL AND OPERATIONAL RESULTS
Production
First quarter production averaged 26,108 boe per day, which is a 24% increase
over production of 21,061 boe per day in the first quarter of 2012. Production
per share increased 11% from the first quarter of 2012.
Production consisted of approximately 82% natural gas and 18% crude oil and
natural gas liquids in the first quarter.
Funds Flow and Earnings
First quarter funds flow was approximately $39.4 million or $0.28 per basic
common share, a 51% increase from the first quarter of 2012. This increase was
largely a result of the 49% increase in the AECO natural gas spot price
averaging $3.20 per Mcf for the quarter ended March 31, 2013 compared to $2.15
per Mcf for the quarter ended March 31, 2012.
In the first quarter of 2013, Birchcliff recorded net income available to
shareholders of $7.4 million as compared to $3.7 million in the first quarter of
2012.
Debt and Capitalization
At March 31, 2013, Birchcliff's bank debt was $452.4 million from available
credit facilities aggregating $540 million. As such, Birchcliff had significant
credit capacity and financial flexibility. At March 31, 2013, Birchcliff's
working capital deficiency was $50.9 million and total debt was $502.3 million.
At March 31, 2013, Birchcliff had outstanding 142,096,130 basic common shares;
164,106,949 fully diluted common shares; and 2,000,000 Series A preferred
shares. The Corporation also had 6,000,000 warrants outstanding, each warrant
providing the right to purchase one common share at an exercise price of $8.30
until August 8, 2014.
Operating Costs
Operating costs in the first quarter were $5.77 per boe (excluding
transportation and marketing costs), down 6% from the first quarter of 2012.
This reduction of operating costs per boe was largely due to increased volumes
of natural gas being processed through the PCS Gas Plant and the implementation
of various optimization initiatives.
PCS Gas Plant Netbacks
Processing natural gas at the Corporation's PCS Gas Plant has materially
improved Birchcliff's funds flow and net earnings.
In the first quarter of 2013, operating costs for natural gas processed at the
PCS Gas Plant averaged $0.28 per Mcfe ($1.68 per boe) and the estimated
operating netback for Birchcliff's natural gas production flowing to the PCS Gas
Plant was $2.83 per Mcfe. Approximately 68% of Birchcliff's natural gas
production and 57% of corporate production was processed at the PCS Gas Plant in
the first quarter of 2013.
The following table details Birchcliff's net production and operating netback
for wells producing to the PCS Gas Plant, on a production month basis.
----------------------------------------
Production Processed through the PCS Three months ended Three months ended
Gas Plant March 31, 2013(1) March 31, 2012
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Average daily production, net to
Birchcliff:
Natural gas (Mcf) 87,104 50,982
Oil & NGLs (bbls) 246 145
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Total boe (6:1) 14,763 8,642
% of total corporate production 57% 41%
Netback and cost: $/Mcfe $/boe $/Mcfe $/boe
Petroleum and natural gas
revenue(2) 3.57 21.40 2.56 15.35
Royalty expense (0.22) (1.33) (0.12) (0.74)
Operating expense, net of
recoveries (0.28) (1.68) (0.20) (1.18)
Transportation and marketing
expense (0.24) (1.40) (0.23) (1.35)
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Estimated operating netback
(production month basis) 2.83 16.99 2.01 12.08
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Operating margin(3) 79% 79% 79% 79%
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(1) The PCS Gas Plant processed an average of 104 MMcf per day of raw gas at
the inlet during the first quarter of 2013.
(2) AECO natural gas price averaged $3.20 per Mcf and $2.15 per Mcf for the
first quarter of 2013 and 2012 respectively.
(3) Operating margin at the PCS Gas Plant is determined by dividing the
estimated operating netback by petroleum and natural gas revenue in the
period.
OPERATIONS UPDATE
Drilling
Birchcliff's 2013 drilling program is focused on our two proven resource plays,
the Montney/Doig Natural Gas Resource Play and the Worsley Light Oil Resource
Play. During the first quarter of 2013, Birchcliff drilled 11 (10.5 net) wells,
including 5 (5.0 net) natural gas wells, and 6 (5.5 net) oil wells.
Wells drilled year-to-date in 2013 include 16 (15.5 net) horizontal natural gas
wells, all of which were completed utilizing multi-stage fracture stimulation
technology, and all of which were successful. These wells consist of 10 (10.0
net) natural gas wells, and 6 (5.5 net) oil wells.
Birchcliff currently has two drilling rigs working, both in the Pouce Coupe area
drilling Montney/Doig horizontal natural gas wells. A third rig will start
drilling oil wells in the Worsley area immediately after spring break-up.
Land
The Corporation has been actively buying more land. We have continued to expand
our undeveloped land base and held 558,454 (521,488 net) acres at March 31,
2013, with a 93% average working interest. During the first quarter of 2013,
Birchcliff acquired 26,805 (26,805 net) acres of undeveloped land, all in its
core area of the Peace River Arch of Alberta. Of the Crown land acquired in the
first quarter of 2013, Birchcliff purchased 13.5 (13.5 net) sections of land in
the Pouce Coupe area. The newly acquired lands are contiguous with our existing
land base and we expect a significant amount of probable reserves and discovered
resources to be attributed to these newly acquired Crown lands at year end.
Birchcliff's land base primarily consists of large contiguous blocks of high
working interest acreage located near facilities owned and/or operated by
Birchcliff or near third party infrastructure. During the first quarter of 2013,
all of the new land has been purchased at 100% working interest.
Montney/Doig Natural Gas Resource Play
In the first quarter of 2013, Birchcliff drilled 5 (5.0 net) Montney/Doig
horizontal natural gas wells and year-to-date Birchcliff has drilled 10 (10.0
net) Montney/Doig horizontal gas wells. Birchcliff continues to expand the
Montney/Doig Natural Gas Resource Play both geographically and
stratigraphically.
On our Montney/Doig Natural Gas Resource Play we are currently utilizing
multi-well pad drilling, allowing us to drill continuously right through spring
break-up. We are currently drilling six horizontal natural gas wells from one
pad and four horizontal natural gas wells from another pad.
The expanded budget for 2013 includes 22 (22.0 net) Montney/Doig horizontal
wells and 1 (1.0 net) Montney/Doig vertical exploration well. Of the 22 (22.0
net) horizontal wells, 20 (20.0 net) wells are targeting the Middle/Lower
Montney Play and 2 (2.0 net) are targeting the Basal Doig/Upper Montney Play. We
anticipate all but one of these wells to produce to the PCS Gas Plant by
year-end, which we expect will fill the PCS Gas Plant to its current licenced
capacity of 150 MMcf per day.
Worsley Light Oil Resource Play
On the Worsley Light Oil Resource Play, in the first quarter of 2013, Birchcliff
drilled 5 (5.0 net) Charlie Lake horizontal oil wells, utilizing multi-stage
fracture stimulation technology.
The increased budget for 2013 now includes 11 (11.0 net) Charlie Lake horizontal
oil wells, from 10 (10.0 net) wells, utilizing multi-stage fracture stimulation
technology.
On the Worsley Light Oil Resource Play in 2013, we are expanding the water flood
area and are conducting the field operations necessary to convert two wells to
injectors and install associated facility infrastructure.
Halfway Light Oil Play
On the Halfway Light Oil Play, in the first quarter of 2013, Birchcliff drilled
1 (0.5 net) Halfway horizontal light oil well utilizing multi-stage fracture
stimulation technology. Birchcliff has drilled 4 (2.66 net) wells on the Play to
date, all of which have been successful. The average initial month one
production (IP30) for these wells was 330 boe per day. Well costs, on average,
were approximately $4.5 million per well, which includes equip and tie-in costs.
With our continued success on the Halfway Light Oil Play, the increased budget
includes 3 (2.0 net) additional wells, for a total of 4 (2.5 net) Halfway
horizontal light oil wells in 2013. This will bring Birchcliff's total number of
Halfway horizontal light oil wells on the Halfway Light Oil Play to 7 (4.66 net)
wells since 2011. In the first quarter of 2013, Birchcliff continued to add to
its land position on the Halfway Light Oil Play.
New Tight/Shale Oil Resource Play Development
In Birchcliff's core area of the Peace River Arch, numerous industry competitors
have announced significant developments on a number of new tight/shale oil
resource plays. Throughout 2011, 2012 and the beginning of 2013, there has been
significant industry activity acquiring land in the Peace River Arch, with
numerous new wells being drilled and completed targeting new resource plays,
including the Montney, Charlie Lake, Nordegg and the Duvernay. We believe that
virtually all of our undeveloped land has potential in at least one of these new
resource plays. Accordingly, we continue to spend significant time analyzing and
evaluating various new resource plays, with a focus on oil opportunities and the
application of horizontal drilling and multi-stage fracture stimulation
technology.
---------------------------------------------
March 31, 2013 December 31, 2012
Tight/Shale Oil Resource Play
Land Holdings (acres) WI Gross Net Gross Net
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Duvernay Resource Play 99% 154,080 153,235 141,280 138,966
Nordegg Resource Play 84% 409,280 345,381 404,200 331,437
Banff/Exshaw Resource Play 99% 428,640 422,952 376,520 344,848
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SHAREHOLDER SUPPORT
We thank Mr. Seymour Schulich, our largest shareholder, for his ongoing
financial and moral support. Mr. Schulich holds 40 million common shares
representing 28.2% of the current issued and outstanding common shares.
OUTLOOK
We are very pleased and excited with the current and future outlook for
Birchcliff. Our production and opportunity portfolio continue to increase while
our cost structure continues to decrease. We have added a significant amount of
contiguous land and additional drilling locations in the heart of our Pouce
Coupe area on the Montney/Doig Natural Gas Resource Play, adjacent to our PCS
Gas Plant and existing infrastructure. We now have up to 2,032 net future
potential horizontal drilling locations on the Montney/Doig Natural Gas Resource
Play. In addition, significant valuable intellectual capital has been created as
a result of utilizing the talent and effort of our people, which is allowing
Birchcliff to consistently achieve excellent results on a repeatable basis.
Birchcliff has now drilled 103 (91.2 net) Montney/Doig horizontal natural gas
wells, utilizing the latest multi-stage fracture stimulation technology.
Birchcliff's 2013 capital budget has increased to $246.6 million, from $184.6
million. Fourth quarter average production in 2013 is expected to be in the
range of 28,000 to 29,000 boe per day and exit production is expected to be
approximately 30,000 boe per day, setting us up for a very healthy and active
2014. Our yearly average production guidance of 26,400 boe per day has not
changed as the majority of Birchcliff's new production in 2013 will commence
late in the year. Drilling more Montney/Doig horizontal natural gas wells and
continuing to fill our PCS Gas Plant, which has spare capacity, as gas price
rises and our per unit operating costs come down, is very profitable.
Birchcliff's Board of Directors has approved a Phase IV expansion of the PCS Gas
Plant in 2014, expanding processing capacity to 180 MMcf per day from 150 MMcf
per day by adding additional compression and sales pipeline capacity. The
estimated cost of the Phase IV expansion is approximately $10 million, with the
majority of the costs to be incurred in 2014. The anticipated start-up date of
the Phase IV expansion will be in the fall of 2014. This expansion positions
Birchcliff with continued visible production growth in 2014.
Birchcliff continues to be focused on improving capital efficiency. We are
utilizing multi-well pad drilling on our Montney/Doig Natural Gas Resource Play
to improve drilling and completion efficiencies and reduce the cost per well;
drilling six horizontal natural gas wells from one pad and four horizontal
natural gas wells from another. The reduction in drilling and completion costs
is significant. Drilling is continuing through spring break-up on these
multi-well pads.
It is very important to understand the timing of Birchcliff's production
additions in 2013 in order to maintain continued confidence in Birchcliff's
production profile and execution. We continue to expect our 2013 average
production to be approximately 26,400 boe per day.
We expect production in the second quarter to be weak as existing wells will
show normal production declines and wells from the multi-well pads will not be
on production until late in the third quarter. As well, in the second quarter,
there are scheduled turn-arounds of both the PCS Gas Plant and the main Worsley
oil battery. Further we are currently experiencing the effects of unscheduled
turn-arounds by third party gas processors, which negatively affects our
production and reinforces the principle that owning and controlling your own
infrastructure and processing facilities is very important and carries strategic
value. Accordingly, and I repeat for emphasis, second quarter production will be
weak and should not cause reason for concern.
Production growth during 2013 will come in large increments in the third and
fourth quarter as multiple wells from the multi-wells pads are brought on
production at the same time. Material production growth will be seen when wells
from the first multi-well pad come on production in August and wells from the
second multi-well pad come on production in September.
We remain focused on our business - growth by the drill bit, in our core area of
the Peace River Arch of Alberta - not by large acquisitions. We continue to use
the same services, in the same area, directed by the same experienced Birchcliff
staff, which provides consistency, repeatability and reliability in our
operations.
On behalf of our Management Team and Directors, thank you to the Birchcliff
staff for their loyalty, dedication and continued hard work to help us achieve
our corporate goals. Thank you to our shareholders for their continued support
and trust in our strategy and our management.
A. Jeffery Tonken, President and Chief Executive Officer
ADVISORIES
Non-GAAP Measures: This Press Release uses "funds flow", "funds flow from
operations", "funds flow netback", "funds flow per common share", "netback",
"operating netback", "estimated operating netback" and "operating margin", which
do not have standardized meanings prescribed by generally accepted accounting
principles ("GAAP") and therefore may not be comparable measures to other
companies where similar terminology is used. Netback or operating netback
denotes petroleum and natural gas revenue less royalties, less operating
expenses and less transportation and marketing expenses. Operating costs at the
PCS Gas Plant (and the components thereof) are calculated on a production month
basis. Estimated operating netback of the PCS Gas Plant is based upon certain
cost allocations and accruals directly related to the PCS Gas Plant and the
related wells and infrastructure, calculated on a production month basis. Funds
flow, funds flow netback or funds flow from operations denotes cash flow from
operating activities as it appears on the Corporation's Condensed Statements of
Cash Flows before decommissioning expenditures and changes in non-cash working
capital. Funds flow, funds flow netback or funds flow from operations is derived
from net income plus income tax expense, depletion and depreciation expense,
accretion expense, stock-based compensation expense, amortization of deferred
financing fees and gains on divestitures. Funds flow per common share denotes
funds flow divided by the weighted average number of common shares. Operating
margin is calculated by dividing the estimated operating netback for the period
by the petroleum and natural gas revenue for the period.
Boe Conversions: Barrel of oil equivalent ("boe") amounts have been calculated
by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas
to one barrel of oil (1 bbl). Boe amounts may be misleading, particularly if
used in isolation. A boe conversion ratio of 6 Mcf to 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.
Mcfe, MMcfe, Bcfe and Tcfe Conversions: Thousands of cubic feet of gas
equivalent ("Mcfe"), millions of cubic feet of gas equivalent ("MMcfe"),
billions of cubic feet of gas equivalent ("Bcfe") and trillions of cubic feet of
gas equivalent ("Tcfe") amounts have been calculated by using the conversion
ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural
gas. Mcfe, MMcfe, Bcfe and Tcfe amounts may be misleading, particularly if used
in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
Forward-Looking Information: This Press Release contains forward-looking
information within the meaning of applicable Canadian securities laws.
Forward-looking information relates to future events or future performance and
is based upon the Corporation's current internal expectations, estimates,
projections, assumptions and beliefs. All information other than historical fact
is forward-looking information. Words such as "plan", "expect", "project",
"intend", "believe", "anticipate", "estimate", "may", "will", "potential",
"proposed" and other similar words that convey certain events or conditions
"may" or "will" occur are intended to identify forward-looking information. In
particular, this Press Release contains forward-looking information relating to
planned fourth quarter and exit production increases; planned 2013 capital
spending and sources of funding; anticipated reduction of operating costs of a
per boe basis; the intention to drill and complete future wells; an expansion of
the PCS Gas Plant; and expected future reserves and resource additions.
The forward-looking information is based upon assumptions as to future commodity
prices, currency exchange rates, inflation rates, well production rates, well
drainage areas, success rates for future drilling and availability of labour and
services. With respect to numbers of future wells to be drilled, a key
assumption is that geological and other technical interpretations performed by
the Corporation's technical staff, which indicate that commercially economic
volumes can be recovered from the Corporation's lands as a result of drilling
future wells, are valid. Estimates as to 2013 average fourth quarter and annual
production rates assume that no unexpected outages occur in the infrastructure
that the Corporation relies on to produce its wells, that existing wells
continue to meet production expectations and any future wells, scheduled to come
on production in 2013, meet timing and production expectations.
Undue reliance should not be placed on forward-looking information, as there can
be no assurance that the plans, intentions or expectations upon which they are
based will occur. Although the Corporation believes that the expectations
reflected in the forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct. As a consequence,
actual results may differ materially from those anticipated.
Forward-looking information necessarily involves both known and unknown risks
associated with oil and gas exploration, production, transportation and
marketing such as uncertainty of geological and technical data, imprecision of
reserves and resource estimates, operational risks, environmental risks, loss of
market demand, general economic conditions affecting ability to access
sufficient capital, changes in governmental regulation of the oil and gas
industry and competition from others for scarce resources.
The foregoing list of risk factors is not exhaustive. Additional information on
these and other risk factors that could affect operations or financial results
are included in the Corporation's most recent Annual Information Form and in
other reports filed with Canadian securities regulatory authorities.
Forward-looking information is based on estimates and opinions of management at
the time the information is presented. The Corporation is not under any duty to
update the forward-looking information after the date of this Press Release to
conform such information to actual results or to changes in the Corporation's
plans or expectations, except as otherwise required by applicable securities
laws.
Birchcliff is a Calgary, Alberta based intermediate oil and gas company with
operations concentrated within its one core area, the Peace River Arch of
Alberta. Birchcliff's Common Shares, Cumulative Redeemable Preferred Shares,
Series A and Warrants are listed for trading on the Toronto Stock Exchange under
the symbols "BIR", "BIR.PR.A" and "BIR.WT", respectively.
FOR FURTHER INFORMATION PLEASE CONTACT:
Birchcliff Energy Ltd.
Jeff Tonken
President and Chief Executive Officer
(403) 261-6401
(403) 261-6424 (FAX)
Birchcliff Energy Ltd.
Bruno Geremia
Vice-President and Chief Financial Officer
(403) 261-6401
(403) 261-6424 (FAX)
Birchcliff Energy Ltd.
Jim Surbey
Vice-President, Corporate Development
(403) 261-6401
(403) 261-6424 (FAX)
Birchcliff Energy Ltd.
Suite 500, 630 - 4th Avenue S.W.
Calgary, AB T2P 0J9
www.birchcliffenergy.com
Birchcliff Energy (TSX:BIR)
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