Perpetual Energy picks up steam
Perpetual Energy released it's financial and operating results for 3 and 6 months.The second quarter had average production of 20,053 barrels per day;this is up 7% from the previous quarter.Production from shallow gas decreased by 20% with the gradual expiration of the 10 year royalty plan.Oil and natural gas liquids increased production by 8% from Q1 mostly from the increased production of heavy oil from Mannville property.Natural gas production of 97MMcf/day was up 6% from Q1.This reflects new wells from West Edson which offsets declines from the shallow gas properties.
Exploration
Perpetual Energy will spend $12 million for the West Edson plant and the Mannville startups.Two horizontal wells will be drilled at Mannville and one at West Edson.Another $15 million has been allocated for 7 horizontal wells including development wells in new pool discoveries.
As the shallow gas wells come out of the royalty plan Perpetual needs to spend more money here on development.In some cases the shallow gas wells can be deepened and production improved.This represents a buffer in production until the Mannville discoveries can be brought onstream.Perpetual also has a newly acquired property in the Duvernay that is being evaluated.A single well is being drilled to evaluate the possible production from the total acreage.East Edson which is getting "accelerated development" has been done through taking a joint venture partner.This is a creative solution and might be used in the Mannville property.Perpetual does not have enough exploratory wells on this property yet.
Financially speaking
Perpetual is doing better financially than many investors thought they would.Total debt decreased by $34 million(from $393 million to $360 million).Funds flow of $26 million was 50% higher than Q2 of $17 million. Production costs decreased by 18% due to changes in it's infrastructure. Yet net income decreased from $14.8 million in Q1 to $2.5 million.This is largely due to non-cash items.Perpetual gave guidance on funds flow for the year of $80 to $90 million;now it seems that it may hit$100 to $110 million.This depends largely on how much increased production comes from their new East Edson field.
2014 Production
Perpetual states that full year production should be around 20,140 barrels per day.This they say will create funds flow of $85 to $90 million for the year.However in an earlier press release Perpetual states that they expect an additional 2000 barrels per day from their new East Edson field.True the first 900 barrels must go to their new JV partner but that could put 2014 production at 21,000 boe/day once the new oil from East Edson is counted.If so then Perpetual Energy might have $100 million funds flow.That's why Perpetual Energy is picking up steam and may hit $2.50 to $2.75 a share this year.However Perpetual may need another JV partner to do this.
Exploration
Perpetual Energy will spend $12 million for the West Edson plant and the Mannville startups.Two horizontal wells will be drilled at Mannville and one at West Edson.Another $15 million has been allocated for 7 horizontal wells including development wells in new pool discoveries.
As the shallow gas wells come out of the royalty plan Perpetual needs to spend more money here on development.In some cases the shallow gas wells can be deepened and production improved.This represents a buffer in production until the Mannville discoveries can be brought onstream.Perpetual also has a newly acquired property in the Duvernay that is being evaluated.A single well is being drilled to evaluate the possible production from the total acreage.East Edson which is getting "accelerated development" has been done through taking a joint venture partner.This is a creative solution and might be used in the Mannville property.Perpetual does not have enough exploratory wells on this property yet.
Financially speaking
Perpetual is doing better financially than many investors thought they would.Total debt decreased by $34 million(from $393 million to $360 million).Funds flow of $26 million was 50% higher than Q2 of $17 million. Production costs decreased by 18% due to changes in it's infrastructure. Yet net income decreased from $14.8 million in Q1 to $2.5 million.This is largely due to non-cash items.Perpetual gave guidance on funds flow for the year of $80 to $90 million;now it seems that it may hit$100 to $110 million.This depends largely on how much increased production comes from their new East Edson field.
2014 Production
Perpetual states that full year production should be around 20,140 barrels per day.This they say will create funds flow of $85 to $90 million for the year.However in an earlier press release Perpetual states that they expect an additional 2000 barrels per day from their new East Edson field.True the first 900 barrels must go to their new JV partner but that could put 2014 production at 21,000 boe/day once the new oil from East Edson is counted.If so then Perpetual Energy might have $100 million funds flow.That's why Perpetual Energy is picking up steam and may hit $2.50 to $2.75 a share this year.However Perpetual may need another JV partner to do this.
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