Equal Energy Ltd., Calgary, (NYSE: EQU) has reported its financial and operating results for the second quarter ended June 30, 2011.
"In the second quarter of 2011, Equal's most significant accomplishment was the acquisition of the working interests of its former joint venture participant in Oklahoma on June 1, 2011," says Don Klapko, president and CEO. "The acquisition, financed by a combination of equity and debt, increased Equal's production to over 11,300 BOE per day and was accretive on a per share basis on measures of cash flow, production and reserves while keeping debt levels consistent on a per flowing boe basis."
Second Quarter Highlights Include:
- purchased our former joint participant's share of the Hunton assets in Oklahoma on June 1, 2011 which also terminated all legal proceedings in Oklahoma, eliminating significant cost and management distraction;
- completed a $50.3 million equity offering on May 19, 2011;
- continued to be active with the drill bit by drilling:
- 2 (1.8 net) Twin Cities / Central Dolomite liquids-rich natural gas wells in Oklahoma;
- 2 (2.0 net) Big Bird vertical natural gas wells in Oklahoma;
- 1 (1.0 net) K-9 exploration well in Oklahoma currently under evaluation; and
- 1 (1.0 net) Cardium horizontal oil well in Alberta.
Production volumes averaged 9,467 BOE/d for Q2 2011, close to production levels in Q2 2010 and up nine percent from Q1 2011 as the company benefited from approximately 3,100 BOE/d of additional volume from the acquisition beginning on June 1, 2011. Equal expects to average between 11,300 and 11,800 BOE/d for the second half of the year and look forward to steady volume growth as it has active drilling programs running on four projects in Alberta and Oklahoma. Funds from operations grew strongly in Q2 2011, up 46% compared to Q2 2010 as Equal benefited from strong oil and NGL prices, lower general and administrative costs and reduced interest costs this year.
In Oklahoma, Equal Energy commenced drilling in the prolific Twin Cities / Central Dolomite (TCCD) area
- One TCCD well permitted by the courts to be drilled by Equal in 2010 came on stream on October 28, 2010, inclined steadily for the first four months stabilizing at its current rate of 150 BOE/d
- Three new TCCD wells have been drilled and put on production in 2011.
- The first 2011 well encountered mechanical difficulties in the horizontal sections such that both horizontal legs did not reach their intended length. This well was producing at 50 BOE/d, well below expectations, so we've re-entered this well and drilled a third horizontal leg which has successfully stayed in the zone for its intended length. This well was brought back on July 29th, 2011 with early indication of a good well.
- The second 2011 well came on stream on June 16th, 2011 and has already inclined to a rate of approximately 190 boe per day with production continuing to increase.
- The third well was brought on stream on July 27th, 2011 with early results very encouraging.
In Canada, Equal Energy's light oil resource plays continue to meet or exceed expectations
- At Alliance, the company brought two remaining Viking light oil wells on stream from the successful six well winter drilling program. Overall, the Alliance Viking play continues to deliver good results with individual well rates of return ranging from 33% to 45%.
- One Lochend Cardium well was drilling as Equal entered Q2 and it came on stream in early May resulting in two Cardium well successes in the first half of 2011 with both wells delivering production volumes at or above expectations for this play.
- Two sections of land have been added at Lochend during in the first half of 2011, more than replacing the inventory drilled. One section was added at Alliance in the second quarter.
- Equal returned to drilling in Lochend in early July and at Alliance at the end of July, both programs significantly delayed due to wet weather. The Cardium well is the final well of three planned for 2011 and the company has plans to drill up to four Viking wells in the second half of the year.
An additional seven well Hunton drilling program was launched in the second quarter of 2011 to increase Equal's liquids-rich natural gas production with the added benefit of preserving rights to the light oil Mississippian zones in the sections drilled which is expected to be tested during the second half of 2011. The Mississippian is a light oil play that has seen significant nearby drilling activity by large US independent E&P companies using horizontal, multi-stage frac technology.
With the acquisition of the company's former partner's assets in Oklahoma adding to cash flow and our U.S. legal issues finally behind us, Equal is looking forward to growing the company and enhancing shareholder value as a dynamic exploration and production company based around focused management, an active drilling program and efficient operations.
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