- Published: 12 January 2010
- Written by Editor
Orion Oil & Gas Corporation Announces Commencement of Listing on the TSX, $85 Million Capital Program for 2010 and Provides Operations Update
Orion Oil & Gas Corporation (TSX: OIP.TO) ("Orion" or the "Company") today announced a capital spending program of $85 million in 2010 for production development operations (the "Capital Program") at its Alberta properties held by its wholly-owned subsidiary, Orion Oil & Gas (North America) Ltd. ("Orion N.A.").
Trading on TSX - Orion is pleased to confirm that it has today officially commenced trading on the TSX under the symbol: OIP.
Capital Program - The Capital Program, which commenced with a winter drilling program in November 2009, includes the drilling of 17 development wells at Kaybob and 18 development wells at Redwater, with the remainder being spent on optimization, workover and facilities programs at Orion's Kaybob, Redwater and Bigstone properties.
Current production from Orion's properties is approximately 2,650 boe/d with a mix of 55% natural gas and 45% light oil and natural gas liquids.
Management expects the Capital Program to be fully funded from internally generated cash flow and a $50 million credit facility between TD Bank and Orion N.A. Orion expects to generate approximately $60 million in operating cash flow in 2010. The Capital Program is well underway, and has experienced 100% success thus far (see discussion below under the heading "Operations Update").
Orion's average guidance for 2010 positions us to continue to develop our Alberta assets without requiring external capital. Orion's projected investment program past 2010 in its existing properties will be funded with internally generated cash flow, and is designed to reach an optimum production plateau of 5,000 to 7,000 boe/d. Once this optimal production level is reached, Orion anticipates significant free cash flow will be available to redirect to other global projects.
South America Growth Strategy
Orion is actively working to expand its operations to South America. As part of Orion's international growth program in South America, it is aggressively pursuing business development in Colombia, Argentina and Peru, all areas in which Orion's management team has significant experience and believes there are excellent opportunities to generate significant growth in value for Orion's shareholders.
2010 Guidance
For 2010, Orion expects:
- Production to average between 4,050 - 4,900 boe/d
- Operating costs of $10-12/boe
Kaybob (91% working interest)
The Kaybob property contains the Swan Hills natural gas condensate field, and represents approximately 80% of Orion's production and reserve value. The Kaybob property is completely covered with 3-D seismic and is well delineated. Orion has historically drilled eight wells on its Kaybob property with a 100% success rate, and all of these wells are on production.
As part of the Capital Program, Orion plans to drill 17 development wells at Kaybob and complete one major workover. The new wells are expected to add 200-300 boe/d production and 500,000 boe reserves per well. Well costs at Kaybob are estimated at $4 million per well to drill, complete and tie-in.
Production from these 17 wells is expected to add 3,400-5,100 boe/d.
Redwater (100% working interest)
The Redwater property contains the Ellerslie light oil formation. Orion has historically drilled 13 wells at its Redwater property with a 100% success rate.
Orion plans to drill 18 wells in 2010 in this area. The winter drilling program commenced in December 2009. The new wells are expected to add 20-25 boe/d production and 30,000-40,000 boe reserves per well. Well costs at Redwater are estimated at $750,000 to drill, complete and tie-in.
Production from these 18 wells is expected to add 360-450 boe/d.
Bigstone (100% working interest)
No new drilling is planned at the Bigstone natural gas property during 2010. Operations at Bigstone involve one workover and reactivating 2 additional wells previously shut in. These operations are expected to bring 400 boe/d onstream at Bigstone by the end of this week.
Price Hedging
To protect the 2010 Capital Program, the Company has established the following price hedges for 2010:
Crude Oil Hedges Natural Gas Hedges
Production Average Average Production Average Average
Period Hedged Floor Ceiling Period Hedged Floor Ceiling
(bbl/d) (US$/bbl) (US$/bbl) (gj/d) ($/gj) ($/gj)
2010 360 $75.00 $94.30 2010 2,640 $6.30 $8.35
2010 1680 $82.18 -
Operations Update
Orion's winter drilling program commenced in November 2009 and includes drilling 6 of the total 17 well program at the Kaybob property, and drilling 8 of the total 18 well program at the Redwater property. The Company has had 100% success during November and December 2009, drilling and casing 4 wells at Kaybob and 1 well at Redwater. The winter program is on schedule and combined results of these operations are expected to add 1,760-1,800 boe/d production by the end of Q1 2010.
Kaybob
At Kaybob, 4 wells have been drilled and cased to date. Well costs at Kaybob are estimated at $4 million per well to drill, complete and tie-in, and all six wells have or are estimated to come in on or under budget.
The first well, 05-15-061-19W5, was drilled to 3,320m and was put on production December 22, 2009 with a stabilized flow rate of 1.8 mmcf/d of raw gas. Wells at Kaybob typically produce 112 bbl/mmcf of condensate and natural gas liquids. All six wells are expected to be on production by the end of Q1 2010. Production from these six wells is expected to add 1,200-1,800 boe/d by Q1 2010.
- 12-32-061-19W5 was drilled to a depth of 3,241m and rig released on December 15, 2009. This well is expected to be on production January 21st.
- 15-14-062-20W5 was drilled to a depth of 3,304m and rig released on December 23, 2009. This well is expected to be on production January 28th.
- 12-21-061-19W5 was drilled to a depth of 3,320m and rig released on January 10th. This well is expected to be on production February 4th.
- 01-12-062-20W5 was spud December 29, 2009 and is expected to be on production February 19th.
- 13-10-061-19W5 will be spud this week and is expected to be on production March 4th.
Redwater
At Redwater, Orion plans to drill 8 wells prior to breakup and a total of 18 wells in 2010. Production from the 8 wells is expected to add 160-200 boe/d by the end of Q1 2010. 08-23-055-21W4 has been drilled and encountered 6.5 m of pay at 25% porosity in the Ellerslie. The well is currently being completed for production.
Bigstone
At Bigstone, 2 wells previously shut in are being brought back on production by the end of this week. A workover is being performed on an additional well. These operations are expected to bring 400 boe/d onstream at Bigstone by January 15th.
Summary Information Relating to Orion
Orion through its wholly-owned subsidiary Orion N.A., is engaged in the exploration for and development of oil and natural gas interests located primarily in the Kaybob, Redwater and Bigstone areas of Alberta. Orion N.A.'s current production is 2,650 boe/d, which is comprised of approximately 45% light oil and natural gas liquids and 55% natural gas. At its Kaybob property, a natural gas condensate field, Orion N.A. has a 91% working interest in 25,600 gross acres. Orion N.A. has drilled 8 wells at Kaybob, with a 100% success rate. At its Redwater property, a light oil field, Orion N.A. has mainly 100% working interest in 8,786 gross acres. Orion N.A. has drilled 14 wells at Redwater, with a 100% success rate. At its Bigstone property, a natural gas field, Orion N.A. has 100% working interest in 1,920 acres. Orion N.A. is operator at its Kaybob, Redwater and Bigstone properties. Orion N.A. has sufficient capital to fully fund the development of its properties.
Forward Looking Statements
This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated future corporate plans and initiatives for Orion and Orion N.A., including details of the winter drilling program, anticipated cash flows, drilling and development plans, sources of income for future investment capital, expected volumes and timing of production and reserves increases, the anticipated geographic scope of the operations of Orion, anticipated finding, development and operating costs, anticipated drilling, workover and completion costs and the timing of wells being brought on to production. Some of the forward-looking statements can be identified by words such as "expects", "anticipates", "should", "believes", "plans", "will" and similar expressions. The forward looking statements contained in this document are based on certain key expectations and assumptions made by Orion, including expectations and assumptions concerning the ability to acquire assets, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the application of regulatory and royalty regimes, the costs of drilling and completing wells, the costs of marketing oil and gas produced by Orion and Orion N.A., the volatility of oil and gas prices, the receipt of cooperation from contractual counterparties where their assistance is required and prevailing commodity prices and exchange rates.
Although Orion believes that the expectations and assumptions on which the forward-looking statements are reasonable, undue reliance should not be placed on the forward-looking statements because Orion can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the availability of capital in the financial markets, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. The forward-looking statements contained in this press release may not be appropriate for other purposes and are made as of the date hereof and Orion does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Measurement and Finding & Development Costs
Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel 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 aggregate of the exploration and development costs described in this press release which were incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.
Non-GAAP Measures
EBITDA (earnings before interest, income taxes, depreciation, and amortization) is used as a measure to analyze the company's ability to generate funds flow. This measure as presented does not have a standardized meaning prescribed by Canadian generally accepted accounting principles and therefore may not be comparable with the calculation of this measure for other entities.
Currency
All amounts in this presentation are in Canadian dollars unless otherwise noted.
Not for distribution to U.S. Newswire Services or for dissemination in the United States of America.
Any failure to comply with this restriction may constitute a violation of U.S. Securities laws.
Contacts
Gary S. Guidry
Orion Oil & Gas Corporation
President & Chief Executive Officer
(403) 297-1430
Douglas Allen
Orion Oil & Gas Corporation
Chief Financial Officer
(403) 297-1430
Trevor Peters
Orion Oil & Gas Corporation
Vice President, Corporate Planning & Business Development
(403) 297-1430
