Chinook Energy Reports Financial and Operational Results for Q3 2015

- November 10th, 2015

Chinook Energy (TSX:SKE) announced its financial and operational results for the three and nine month periods ended September 30, which showed an average production of 4,900 barrels of oil equivalent per day, a 22 percent decrease from Q2.

Chinook Energy (TSX:SKE) announced its financial and operational results for the three and nine month periods ended September 30, which showed an average production of 4,900 barrels of oil equivalent per day, a 22 percent decrease from Q2.
As quoted in the press release:

Our average production during the third quarter of 4,900 boe/d decreased 20% from the second quarter of 2015 and 33% from the same quarter of 2014. In September, in response to depressed natural gas prices in northeastern British Columbia, we temporarily shut-in 16.3 mmcf/d of production volumes (5.4 mmcf/d for the third quarter) that were not tied to firm processing or transportation commitments. The decrease in the northeastern British Columbia natural gas prices on the Spectra (Station 2 pricing) and Alliance (CREC pricing) pipeline systems was caused by ongoing pipeline service restrictions and reduced system capacity which should be largely resolved by mid-November 2015. As part of our continuing effort to proactively manage our production, we also shut-in another 600 boe/d of lower netback production in response to lower commodity prices, early in the second quarter. Compared to 2014, our third quarter production also decreased as a result of non-core property dispositions which had associated production of approximately 1,450 boe/d at the time of their sale. Offsetting our decrease relative to 2014 was production from our successful 2014 and 2015 Birley/Umbach drilling program and a strategic acquisition in the same area late in the fourth quarter of 2014.
Our third quarter revenue was down 28% from the second quarter of 2015 and 64% from the third quarter of 2014 as a result of a lower realized weighted average commodity price and lower volumes. Crude oil prices began to decrease significantly late in 2014 as a result of an oversupply in the crude oil market. An increase in natural gas supply and ongoing pipeline service restrictions and reduced system capacity in northeastern British Columbia contributed to volatile natural gas price fluctuations. However, our realized weighted average natural gas price during the third quarter increased to $2.56/mcf from $2.50/mcf during the previous quarter as a result of proactively temporarily shutting-in low price production in northeastern British Columbia and an increase in the Alberta natural gas spot price.

Highlights:

  • We ended the quarter with a strong balance sheet including a working capital surplus of $41.2 million and remained undrawn on our $75.0 million reserve-based revolving credit facility and expect to remain undrawn through the remainder of 2015 and into 2016.
  • Our third quarter funds from operations were $3.3 million, an increase of 10% over the second quarter of 2015, driven by lower operating and G&A costs, despite lower production and a lower weighted average realized commodity price.
  • Our third quarter capital expenditures of $7.3 million included the completion of three wells (2.75 net), as well as continued work on a facility expansion, all of which were on our Birley/Umbach property in northeastern British Columbia. We continue to deliver strong results and improved capital efficiencies on our 2015 Montney drilling program at Birley/Umbach. The initial test results from these wells were positive as disclosed in our news release from October 16, 2015.
  • We continue to proactively manage our production which resulted in our average production during the third quarter decreasing 20% from the second quarter of 2015 and 33% from the same quarter of 2014. We temporarily shut-in 16.3 mmcf/d of production volumes in September in response to depressed natural gas prices in northeastern British Columbia resulting from pipeline service restrictions. These shut-ins were incremental to the 600 boe/d of lower netback production we shut-in prior to September.

Click here to read the full Chinook Energy (TSX:SKE) press release.

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